تاثیر شفافیت بر کیفیت بازار بورس اوراق بهادار تایوان

This paper examines the impact of increased transparency on market quality for stocks listed on the Taiwan Stock Exchange in the pre- and post-period of enhanced transparency starting from January 1, 2003. The Taiwan Stock Exchange discloses unexecuted orders of the five best bid and ask prices following the increased transparency. The empirical results indicate a significant improvement in market quality following the enhanced transparency. Both the bid–ask spreads and the standard deviation of returns decrease significantly in the post-period. Moreover, market depth increases significantly in the post-period. Finally, the results are robust when the market quality of different trading-volume groups is examined.

The issue of how transparency affects market quality is important in the design of financial exchanges. The ability of traders to observe information in the trading process will affect their supply of and demand for liquidity. Although transparency may potentially contribute to the improvement of market quality, both theoretical analysis and empirical results on the impact of transparency are mixed. Proponents suggest that increased transparency improves market quality because investors' risk of trading with informed traders would become lower. However, enhanced transparency may discourage informed traders from supplying liquidity because they would be forced to disclose their private information when their submitted orders are revealed to other market participants. Previous empirical results on the impact of transparency on market quality are mixed. Using data from the OpenBook of the New York Stock Exchange (NYSE), Boehmer, Saar, and Yu (2005) report improved market quality under enhanced transparency. However, Madhavan, Porter, and Weaver (2005) find that increased transparency is associated with reduced liquidity. They report larger effective bid–ask spreads and percentage spreads following increased transparency in the Toronto stock market. Thus, further empirical research is needed to enhance our understanding of how transparency affects market quality. Starting from January 1, 2003, the Taiwan Stock Exchange decided to enhance transparency by disclosing unexecuted orders of the five best bid and ask prices to investors. This change in the disclosure rule is a natural experiment on the effect of transparency on market quality. As such, this paper attempts to examine the impact of enhanced transparency on market quality by comparing stock price behavior during the period before and after the enhanced transparency starting on January 1, 2003. The main features of the Taiwan Stock Exchange involve the use of a call auction method to match orders via an electronic system in the daily trading time from 9:00 a.m. until 1:30 p.m. For the opening, submitted buy and sell orders are aggregated over the pre-trading time from 8:30 to 9:00 a.m. and then matched to determine the opening price. Following the opening, buy and sell orders are aggregated over a time interval of approximately 30 to 45 s and then matched in the daily trading session from 9:00 a.m. to 1:25 p.m. For the closing, the orders are aggregated over the last five minutes of daily trading time from 1:25 p.m. to 1:30 p.m. and then matched to determine the closing price. Retail investors play an important role in the trading volume of the Taiwan Stock Exchange in the sample period of 2002–2003. Security transactions of domestic individuals accounted for 82.3% and 77.8% of transactions in 2002 and 2003, respectively, and the remaining transactions were by institutional investors. In general, retail investors have less access to private information. Thus, they are in a disadvantaged position when trading with informed traders such as institutional investors. With the disclosure of submitted orders at the five best bid and five best ask prices starting on January 1, 2003, retail investors' risk of trading with informed investors would become lower. Thus, it is expected that the increased transparency would benefit retail investors and improve market quality. We examine market quality by comparing stock price behavior in the pre- and post-period surrounding the enhanced transparency starting on January 1, 2003. The empirical results indicate that market quality improves significantly following increased transparency. Both the bid–ask spreads and the standard deviation of returns decrease significantly under the increased transparency. Moreover, market depth improves significantly in the post-period. Finally, the results are robust when market quality is examined over different trading-volume groups. This paper is organized as follows. The next section provides a brief review of previous literature. The third section presents the institutional background of the Taiwan Stock Exchange. The fourth section describes the data and methodology used in this research. The fifth section reports the empirical results. The final section presents the conclusion.

This paper examines the impact of increased transparency on market quality for stocks listed on the Taiwan Stock Exchange. Starting from January 1, 2003, the Taiwan Stock Exchange enhances market transparency by disclosing unexecuted orders of five best bid and ask prices. This change in transparency presents an opportunity to examine its impact on market quality. We compare the market quality for the period surrounding the change in transparency. The pre-period covers the three months from October 1, 2002 to the end of 2002. The post-period covers the three months from March 1, 2003 through May 31, 2003. The sample involves a total of 459 listed stocks on the Taiwan Stock Exchange. Market quality measures including bid–ask spreads, standard deviation of returns, and market depth are examined in the pre- and post-period. Moreover, the bid–ask spreads are decomposed into the order processing component and the asymmetric information component. The empirical results indicate an improved market quality following enhanced transparency. Both the bid–ask spreads and the standard deviation of returns decrease significantly in the post-period. Moreover, market depth increases significantly in the post-period. When the bid–ask spreads are decomposed into two components, both the order processing costs and the asymmetric information costs decrease following the increase in transparency. The results are robust when trading activity is controlled for. Moreover, the results remain qualitatively the same when the three-month window is extended to a six-month window before and after the change in transparency.