Karthik Balakrishnan
The Wharton School of the University of Pennsylvan
1318 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6365
E-Mail: 
NBER Working Papers and Publications
| April 2013 | Shaping Liquidity: On the Causal Effects of Voluntary Disclosure
with Mary B. Billings, Bryan T. Kelly, Alexander Ljungqvist: w18984
Can managers influence the liquidity of their firms' shares? We use plausibly exogenous variation in the supply of public information to show that firms seek to actively shape their information environments by voluntarily disclosing more information than is mandated by market regulations and that such efforts have a sizeable and beneficial effect on liquidity. Firms respond to an exogenous loss of public information by providing more timely and informative earnings guidance. Responses appear motivated by a desire to reduce information asymmetries between retail and institutional investors. Liquidity improves as a result of voluntary disclosure and in turn increases firm value. This suggests that managers can causally influence their cost of capital via voluntary disclosure. Published: Karthik Balakrishnan & Mary Brooke Billings & Bryan Kelly & Alexander Ljungqvist, 2014. "Shaping Liquidity: On the Causal Effects of Voluntary Disclosure," Journal of Finance, American Finance Association, vol. 69(5), pages 2237-2278, October. citation courtesy of 
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