Quarterly Reporting and Market Liquidity

Trading in U.S. equity markets is fast and cheap.  While proponents of ending quarterly reporting point to the dangers of short-termism, less frequent disclosure is also likely to lead to a decline in liquidity and to greater trading costs.  The SEC should carefully consider the effect of increasing asymmetry on the flow of investment capital in secondary markets.

For decades, economists have pointed out that asymmetric information inhibits trade, beginning with George Akerlof’s famous observation that nobody will buy used cars if there is a high enough chance that some are lemons.[1]  In modern financial markets, the risk of … Read more

What Happens When an Activist Goes on the Board?

After over a year of work, which included the review of some 635,450 Form 8-Ks filed by 7,799 public companies from January 1, 2000, to September 30, 2016, we think we know at least one answer to the question in the above title: Informed trading soars! We have just posted our research, which we co-authored with former Columbia Law Professor and now SEC Commissioner Robert Jackson and Robert Bishop, a recent Columbia Law graduate, on SSRN,[1] available here. Above all, it shows that following the appointment of a hedge fund-nominated director to the board, the target firm experiences … Read more