Financial Disclosure and Speculative Bubbles: An International Comparison

The paper examines if a country's financial disclosure system affects the likelihood of speculative bubbles. We compare stock returns of eight countries that differ in the quality of their disclosure systems as ranked by Saudagaran and Biddle (1992). We examine the hypothesis that stock prices of firms in countries with a low level of financial disclosure are more prone to speculative bubbles. We employ the duration dependence model developed by McQueen and Thorley (1994) to test for the presence of bubbles. We found that returns in Japan, a country with a relatively low level of disclosure, shows evidence of a bubble.