The Filing System and the Stock Price Change in the Kobe Earthquake

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This paper evaluates the Japanese filing system (timely disclosure guideline) ruled by the Osaka Securities Exchange in the case of the Kobe Earthquake at the early morning of January 17, 1995, by time series analysis and by cross sectional analysis. The final sample consists of 252 letters from 134 firms, which are eleven percent of the listed firms in the Exchange.Firstly we can easily find the big sudden fall of stock price not only in 134 sample firms but also in a whole market measured by TOPIX within a week after the Kobe Earthquake. The substantial part of this drop seems to be explained from market as a whole and from a potential contagion effect. And the decline continued until the third week in March. However we can also find decreasing pattern of market adjusted return (the difference between 134 firms return and TOPIX return). This fact may suggest potential information content of filing information.Secondly we examine damage disclosures from the point of timeliness and acc … More uracy days by using absolute market adjusted returns. We find the very weak relationship between later informative disclosures and stock price changes under the simultaneous test of timeliness variable and accuracy variables by regression analysis and we find the strong association between early less-informative disclosures and stock price changes both in univariate analysis and in bivariate analysis. Timeliness is more important than accuracy in the stock market. The mean of market adjusted returns of 134 firms shows negative value in the sixty-one up-days of the market. However, in the seventy-five down-days, market adjusted returns are positive but very similar to the market return. The firms with two types of information from filing disclosure and from newspapers show the largest negative cumulative market adjusted returns and the firms without both type of information exhibit the smallest negative returns.In summary our findings support the usefulness of the Japanese filing system in the Kobe Earthquake. Less