As part of the financial sector deregulation, India's central bank mandated specific annual report disclosures effective March 31, 2000, that primarily related to a bank's loan assets. This study attempts to verify whether these mandated disclosures were transparent to investors and whether they had any impact on the level of information asymmetry surrounding bank stocks as measured by their bid‐ask spreads. The results indicate that the mandatory disclosures were indeed transparent to investors and that bid‐ask spreads and asymmetric information costs reduced in the postdisclosure period. Overall, the results suggest that the Reserve Bank of India's (RBI) efforts to reinforce the market's disciplining mechanism by mandating better quality disclosures has been positively received by investors.

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