Disclosure of Accounting Information and Stock Return Volatility in Brazil
14 Pages Posted: 26 Oct 2005
Date Written: October 25, 2005
Recent studies have shown the existence of a relationship between the disclosure of accounting information and economic effects. The disclosure of value-relevant accounting information reduces the information asymmetry on the market and, consequently, the risk of investors making mistakes in their decisions, which fosters the attraction of foreign capital. This paper has the purpose of investigating if there is a cross-firm relationship between the disclosure of accounting information and the volatility of stock returns of Brazilian firms. The hypothesis tested is that firms with higher levels of disclosure present lower volatility of stock returns. The research design involves a sample including 40 stocks belonging to 30 firms listed on the Brazilian stock exchange (Bovespa) and an econometric model consisting of a cross-firm linear regression, as well as robustness tests. The empirical tests performed are robust and confirm the hypothesis raised a priori.
Keywords: Brazil, stock market, stock returns, disclosure, accounting, volatility, econometric model
JEL Classification: C21, G10, M41, M45
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