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Disclosure quantity and the efficiency of price discovery: Evidence from the Toronto Stock Exchange

Dennis Chung (Faculty of Business Administration, Simon Fraser University, Burnaby, Canada)
Karel Hrazdil (Faculty of Business Administration, Simon Fraser University, Burnaby, Canada)
Nattavut Suwanyangyuan (Beedie School of Business, Simon Fraser University, Burnaby, Canada)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 9 May 2016




The purpose of this paper is to investigate the effect of the information disclosure quantity on the pricing efficiency of stocks.


Using a sample of large and actively traded Canadian companies listed on the Toronto Stock Exchange, the authors utilize annual reports filed on system for electronic document analysis and retrieval (SEDAR) between 2003 and 2013 to estimate the amount of publicly available information and find that the length and size of annual reports are important determinants of short-horizon return predictability from historical order flows, which is an inverse indicator of market efficiency.


The results show that longer and larger annual reports are associated with reduced information asymmetry, lower cost of immediacy, higher trading activity, and an overall improvement in the efficiency of price discovery. The results are robust to the inclusion of controls for various determinants of short-horizon return predictability, such as trading costs, volatility, informational effects and other firm-specific characteristics.

Research Limitations/implications

Collectively, the findings provide empirical support for the benefits of detailed corporate disclosure in Canada.


This is the first study to utilize the short-horizon return predictability approach to evaluate the efficiency of price discovery in relation to the amount of information disclosure.



The authors greatly appreciate the comments of P. O’Brian, R. Lundholm, K. Klassen, I. Gordon, C. Emby, B. Phillips, C. Wiedman, T. Scott, and participants in seminars at Simon Fraser University, University of Waterloo, and participants at the European Accounting Association conference, Canadian Academic Accounting Association conference and the Vietnam International Conference in Finance. They acknowledge financial support from the CPA Education Foundation of the Institute of Chartered Professional Accountants of British Columbia and the Social Sciences and Humanities Research Council of Canada. Any errors are of authors.


Chung, D., Hrazdil, K. and Suwanyangyuan, N. (2016), "Disclosure quantity and the efficiency of price discovery: Evidence from the Toronto Stock Exchange", Review of Accounting and Finance, Vol. 15 No. 2, pp. 122-143.



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