Bank opacity and efficiency of stock prices

Subject Areas : Journal of Investment Knowledge

Heyedeh  Erfani ¹ (M.Sc. Student of Business Administration- Financial Management, Department of Financial Management, Tehran North Branch, Islamic Azad University, Tehran, Iran.)
Ali  Rahmani ² (Professor, Department of Accounting, Faculty of social sciences and Economy, Alzahra University, Tehran, Iran.)
Alireza  Heidarzadeh Hanzaee ³ (Assistant Prof. Dr. , Department of Financial Management, Tehran North Branch, Islamic Azad University, Tehran - Iran)

Received: 2019-08-05 Accepted : 2019-08-19 Published : 2021-09-23

Keywords: banks, Iran Capital Market, spread, price delay, finance opacity,

Abstract :

This research investigates the effect of opacity on the delay of the stock price (Tehran stock exchange and Iran Farabourse) reactions in the banks and other companies in Iran Capital Market. The proxy of opacity has been considered the spread (bid – ask gap). Hou and Moskowitz's (2005) model was used to calculate the price delay reaction. Moreover, considering the importance of economic conditions, the impact of periods of boom and stagnation (GDP) on this relationship was also investigated. The research sample consisted of banks listed in Iran Capital Market as well as companies whose market capitalization is equal to 25% of the average market value of banks. The time period was from the beginning of 2009 to the end of September 2016. The hypotheses were tested using panel data. The results indicated a significant relationship between reaction price delay and spread, which confirmed the effect of opacity on the delay price reactions. The results also showed that there is no significant difference between the stock price delay reaction of banks and other companies while there is a significant relationship between economic conditions and delay price reactions.

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