THE EFFECT OF INFORMATION TRANSPARENCY ON STOCK PRICES OF FINANCIAL INSTITUTIONS: EVIDENCE FROM TAIWAN

In this paper, we examine the stock price reactions of financial institutions when their information transparency is announced by the Securities and Futures Institute in Taiwan over the period 2011-2014. Our results indicate that the effect of information transparency has a significant positive stoc...

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Bibliographic Details
Published in:International journal of organizational innovation 2020-01, Vol.12 (3), p.208-217
Main Authors: Lin, Hueh-Chen, Huang, Jiang-Chuan
Format: Article
Language:English
Subjects:
Abnormal returns
Asymmetry
Earnings
Financial institutions
Insurance industry
Investments
One stop shopping
Prices
Rates of return
Securities markets
Stock exchanges
Stock prices
Stockholders
Supply chains
Technological planning
Transparency
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Summary:In this paper, we examine the stock price reactions of financial institutions when their information transparency is announced by the Securities and Futures Institute in Taiwan over the period 2011-2014. Our results indicate that the effect of information transparency has a significant positive stock return on the financial institutions, and this evidence is consistent and robust across all financial industries including financial holding, banking, insurance and security industries. Furthermore, we find that financial institutions with high transparency have a positive stock price reaction, while there is a negative response for the financial institutions with low transparency. The evidence implies that the stock market differentiates between financial institutions with high transparency and those with low transparency. It also suggests that the investors anticipate that financial institutions with lower information transparency will exhibit the effect of more serious information asymmetry on the value of financial institutions.
ISSN:1943-1813