Disclosure Quality and Stock Returns in the UK
Journal of Applied Accounting Research, Forthcoming
38 Pages Posted: 4 Nov 2009 Last revised: 26 Nov 2013
Date Written: November 3, 2009
Abstract
The purpose of this paper is to update and re-examine the role of corporate narrative reporting in improving investors’ ability to better forecast future earnings change. We also construct a risk factor for disclosure quality (DQ) and test whether such a factor is useful in explaining the time-series variation of UK stock returns. Our paper contributes to the market based accounting research in three crucial ways. Firstly, it offers updated evidence on the usefulness of corporate narrative reporting to investors. Secondly, it offers evidence that the DQ factor is a significant risk factor in the UK. Thirdly, and finally, it finds that the Fama-French factors might contain DQ related information.
Keywords: Narrative disclosure, Future oriented information, Value relevance, Fama-French factors, Stock return, United Kingdom
JEL Classification: G12, G14, G20
Suggested Citation: Suggested Citation
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