Information Asymmetry Surrounding Earnings and Dividend Announcements: An Intra-day Analysis

Abstract: This paper uses high frequency data to evaluate whether information asymmetry in the market is reduced as a result of corporate earnings and dividend announcements. Changes in the level of information asymmetry due to the announcements are proxied by the rate of change in trading volume, bid-ask spread, cumulative abnormal returns, and order imbalance. Our results show support for an information asymmetry reduction due to the release of corporate earnings and dividend for all proxies of information asymmetry except for trading volume. Cross-sectional analysis shows that firm size and forecast errors are the two main explanatory variables for the change in information asymmetry