Title: Voluntary disclosure and stock market liquidity: evidence from the Jordanian capital market

Authors: Ayman E. Haddad, Wasim K. AlShattarat, Haitham Nobanee

Addresses: Faculty of Economics and Administrative Science, Hashemite University, P.O. Box 150459, Zarqa 13115, Jordan. ' Faculty of Economics and Administrative Science, Hashemite University, P.O. Box 150459, Zarqa 13115, Jordan. ' Faculty of Economics and Administrative Science, Hashemite University, P.O. Box 150459, Zarqa 13115, Jordan

Abstract: The objectives of this study are to measure the level of voluntary disclosure provided in the annual reports of Jordanian companies and to examine the impact of disclosure level on the stock market liquidity using Jordanian data. To achieve the first objective, a self-constructed disclosure index consisting of 62 items was applied to the annual reports of 60 Jordanian non-financial companies listed at the Amman Stock Exchange for the year 2004. It was found that there is a considerable variation in the extent of voluntary disclosure among the companies. On average, a company disclosed 28% of the items of information included in the disclosure index. To achieve the second objective of this study, the relative bid-ask spread was used as a proxy for stock market liquidity. The results of regressing the bid-ask spread on disclosure level, after controlling for other variables, show that the higher voluntarily disclosed information provided in the Jordanian annual reports reduces the spread between the bids and asks, and thereby increases the stock market liquidity.

Keywords: Arab financial markets; financial reporting; stock market liquidity; voluntary disclosure; Jordan; capital markets; annual reports.

DOI: 10.1504/IJAAPE.2009.026629

International Journal of Accounting, Auditing and Performance Evaluation, 2009 Vol.5 No.3, pp.285 - 309

Published online: 21 Jun 2009 *

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