Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market

P.J. Engelen, M.R. Kabir

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Abstract

This paper examines the effect of temporarily suspending the trading of exchange-listed individual stocks.We evaluate whether the regulatory authorities can successfully use the mechanism of trading halts in forcing companies to disclose new and material information to the capital market.In contrast to previous studies which mainly concentrate on North-American stock markets, this study utilises a new data set comprising of firms listed on the Brussels Stock Exchange.Our results show that suspension is indeed an effective means of disseminating new information.Stock prices adjust completely and instantaneously to the new information released during trading suspensions.We also observe a significant increase in trading volume after the reinstatement of trading.On the other hand, we do not find any increase in stock return volatility around trading suspensions.Overall, our results confirm the efficacy of trading suspensions in disseminating new information.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages30
Volume2001-92
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-92

Keywords

  • capital markets
  • information
  • trade

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    Engelen, P. J., & Kabir, M. R. (2001). Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market. (CentER Discussion Paper; Vol. 2001-92). Finance.