The impact of corporate disclosures on information asymmetry and stock-market liquidity in France

This paper aims at studying the effect of the extent of disclosure on information asymmetry and stock-market liquidity in France. Our sample includes196 French listed firms over a period ranging from 2004 to 2007, the results show that the extent of disclosure in annual reports positively influence the liquidity of the French market. This is explained by the negative effect of the disclosure on the adverse selection component of the bid-ask spread. This effect is further confirmed by the commitment to IFRS by French-listed firms from 2005. This result should encourage French authorities to further improve their information environment as essential to reduce the costs of asymetric information and prevent the risk of illiquidity.