Voluntary disclosure quality, institutional ownership, and stock price volatility: Evidence from a frontier market

Abstract

In this paper, we examine the impact of voluntary financial disclosure quality on the stock price volatility of non-financial firms quoted on the Tunis Stock Exchange. Empirically, we first test the impact of voluntary disclosure quality on stock price volatility. Then, we examine the combined effect of voluntary disclosure quality and institutional ownership on stock price volatility. We study a sample of 411 annual reports of non financial companies listed on the Tunisian stock exchange observed over the 2010–2019 period. The results show that voluntary disclosure quality has a negative impact on stock price volatility. Our results also show that the impact of voluntary disclosure quality on stock price volatility is still significantly negative even after incorporating institutional ownership into our empirical model to test the robustness of our results. Moreover, the positive impact of institutional ownership on stock price volatility is lessened by its indirect relationship with voluntary financial disclosure quality.