The Impact Of Public Information Disclosure On The Quality Of Financial Market

Public information disclosure in the financial market is an important cornerstone for improving the quality of the financial market.Public information disclosure reduces information asymmetry between companies and investors,thereby maintaining the normal operation of the financial system and safeguarding the interests of investors.Starting from 2022,China has fully implemented a stock issuance registration system,and the scale of listed companies and capital markets has continued to grow,posing higher requirements for information disclosure.This paper studies the impact of public information disclosure on the quality of financial markets under the framework of the two period rational expectations model.Most investors in the financial market are short-term traders,who often engage in frequent trading.Therefore,a two-stage dynamic model is needed to characterize this trading environment.There are two ways to disclose public information:the first is to improve the accuracy of public information;The second way of information disclosure is to increase the proportion of public information in the total amount of information.This article uses theoretical analysis to analyze the impact of public information disclosure on the quality of financial markets.Firstly,the basic assumptions of the trader’s utility function and information structure are given;Secondly,solve the optimal risk asset demand function for informed and uninformed traders;Then we use the market clearing condition of risk assets to solve the two period equilibrium price;Finally,the specific forms of market liquidity,market efficiency,and capital cost were derived,and a comparative static analysis was conducted using MATLAB.The main conclusions of the article are as follows:Firstly,in the first public information disclosure model,when the accuracy of private information is exogenous,public information disclosure is set to improve the accuracy of public information.Public information disclosure under the two dynamic frameworks will improve market liquidity,price efficiency,and reduce capital costs.The significance of this public information disclosure method is to let all rational traders know more accurate information.Secondly,the second public information disclosure model introduces another form of public information disclosure,which fixes the total amount of public and private information.Public information disclosure is equivalent to increasing the proportion of public information.This public information disclosure method can provide more information to uninformed traders.The research results of the model show that the impact of public information disclosure on the quality of financial markets depends on the proportion of informed traders in the market.When the proportion of informed investors is relatively low,public information disclosure can improve the liquidity,price efficiency,and reduce capital costs of the two markets.However,when the proportion of informed investors is high,the impact of public information disclosure on market liquidity and price efficiency in the two periods shows a trend of first decreasing and then increasing,the impact on the first period capital cost shows a trend of first increasing and then decreasing,and the impact on the second period capital cost shows an upward trend.This is because under this public information disclosure method,more public information disclosure will reduce the total private information volume of prices,thereby reducing price accuracy,and this deterioration effect on price accuracy increases with the increase of the proportion of informed traders.At the same time,under the two period model,the traders in the second period will use the Price signal in the first period in addition to the Price signal in the second period.Therefore,the public information disclosure will bring more serious losses to the average information accuracy of traders,and then bring adverse effects to the quality of the financial market.Based on the comparative research results of this article,the following policy recommendations are given:when public information disclosure does not affect the quality and quantity of private information of informed traders,disclosure is beneficial for the quality of the financial market,and companies should actively disclose information.When public information disclosure affects the amount of private information obtained by informed traders,in some cases,disclosure can have adverse effects on financial markets.Specifically,when the number of informed traders in the market is relatively low,or when the proportion of informed traders is relatively high but the proportion of public information in the market is also high,that is,public information dominates,and disclosure is beneficial for the quality of the financial market.On the contrary,when the proportion of informed traders is relatively high but the proportion of public information in the market is also low,that is,private information dominates,and disclosure is detrimental to the quality of the financial market.So,in order to improve the quality of financial markets,on the one hand,companies should be encouraged to actively disclose public information;On the other hand,companies should strive to improve the quality of public information disclosure and prioritize the quality rather than quantity of public information.