The relation among capital markets, financial disclosure, production efficiency, and insider trading

Article Abstract:

The relationship among the capital market, a firm's level of disclosure, cost of capital, agency costs and insider trading was analyzed through a model that involves a manager, liquidity-motivated traders, an entrepreneur, shareholders and a market maker. Financial disclosure relies on the liquidity of the capital market. Due to rational pricing and insider trading activity, productivity and cost of capital also affect a firm's financial disclosure. More disclosure means less-efficient performance gauges, more agency problems, lesser output, lesser insider-trading profits for the manager and lower cost of capital. The investors' potential liquidity was found to be directly proportional to the optimal level of disclosure, the liquidity of the market and the manager's moral hazard problem even as cost of capital and expected profits of insider trading are reduced.

Capital market, Capital markets, Insider trading in securities, Insider trading (Securities), Disclosure statements (Accounting), Productivity accounting

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The effect of sequential information releases on the variance of price changes in an intertemporal multi-asset market

Article Abstract:

Examination is presented for several factors in the magnitude of theoretical price change reactions to information releases. Consideration is also given to how those factors alter the magnitude of price responses to new data. Two public information releases on two risky assets are considered in sequence. Each of the releases shows the true cash distribution for the risky asset, plus 'noise'. Although the model presented may be useful for those interested in studying empirically the determinants of cross-section price change variations, it is difficult to create empirical tests to analyze the cross-sectional variation.

Economic aspects, Accounting, Corporation reports, Company reports, Press releases

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