Review of Accounting Studies

, Volume 7, Issue 1, pp 33–52

Corporate Disclosure Policy and the Informativeness of Stock Prices

  • David S. Gelb
  • Paul Zarowin

DOI: 10.1023/A:1017927530007

Cite this article as:
Gelb, D.S. & Zarowin, P. Review of Accounting Studies (2002) 7: 33. doi:10.1023/A:1017927530007


We examine the association between voluntary corporate disclosure and the informativeness of stock prices. We measure corporate disclosure using the AIMR-FAF annual corporate disclosure ratings. We define price informativeness by the association between current stock returns and future earnings changes: more informative stock price changes contain more information about future earnings changes. To measure this association, we regress current returns against (current and) future earnings changes. The aggregated coefficient on the future earnings changes, which we refer to as the future ERC, is our measure of informativeness (association).

We hypothesize and find that greater disclosure is associated with stock prices that are more informative about future earnings (i.e., higher future ERC). These results provide empirical support for the widely held, but heretofore empirically undocumented, belief that greater disclosure provides information benefits to investors.

disclosure future ERC informativeness 

Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • David S. Gelb
  • Paul Zarowin

There are no affiliations available

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