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Author: Ashiq Ali Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study documents an association between changes in institutional ownership during a calendar quarter and abnormal returns at the time of subsequent announcements of quarterly earnings. The result is driven by the portfolio returns of the extreme deciles of changes in institutional ownership, suggesting that institutions trade based on information about future earnings, but that such trading is not widespread. We also find that the difference between earnings announcement returns of the extreme deciles of change in institutional ownership is much greater when change in institutional ownership of a stock is driven by relatively few institutions, measured using the skewness of the distribution of change in institutional ownership of the stock. This result suggests that when fewer differentially informed investors make disproportionately large purchases or sales of stocks, a greater amount of the information on which they base their trades is not impounded in prices until the subsequent earnings announcement. Finally, we show that our results obtain for institutional investors with short-term focus, such as independent advisors, investment companies and insurance companies, but not for institutional investors with long-term focus, such as internally managed pension funds, educational institutions, and private foundations. This result further supports our conclusions regarding informed trading by institutions based on information about forthcoming earnings.
Author: Ashiq Ali Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study documents an association between changes in institutional ownership during a calendar quarter and abnormal returns at the time of subsequent announcements of quarterly earnings. The result is driven by the portfolio returns of the extreme deciles of changes in institutional ownership, suggesting that institutions trade based on information about future earnings, but that such trading is not widespread. We also find that the difference between earnings announcement returns of the extreme deciles of change in institutional ownership is much greater when change in institutional ownership of a stock is driven by relatively few institutions, measured using the skewness of the distribution of change in institutional ownership of the stock. This result suggests that when fewer differentially informed investors make disproportionately large purchases or sales of stocks, a greater amount of the information on which they base their trades is not impounded in prices until the subsequent earnings announcement. Finally, we show that our results obtain for institutional investors with short-term focus, such as independent advisors, investment companies and insurance companies, but not for institutional investors with long-term focus, such as internally managed pension funds, educational institutions, and private foundations. This result further supports our conclusions regarding informed trading by institutions based on information about forthcoming earnings.
Author: Yawen Jiao Publisher: ISBN: Category : Languages : en Pages : 58
Book Description
This paper finds that the well-documented positive relation between institutional ownership and future equity returns (e.g., Gompers and Metrick, 2001) comes almost entirely from independent institutions. Independent institutional trading predicts future stock returns with no long-run price reversal, and is positively related to future earnings surprises (relative to analyst expectations) and earnings announcement abnormal returns. In contrast, grey institutions (institutional investors that have existing or potential business relationships with firms in which they invest) have no such predictive power. Independent institutions' predictive power comes from their advantage in information production instead of their willingness to monitor: (1) the predictive power of independent institutional trading exists only among firms with high information production costs, but not among firms with low information production costs; (2) independent institutional trading is not associated with subsequent industry-adjusted operating performance.
Author: Ashiq Ali Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study documents that change in institutional ownership of a company during a calendar quarter is associated with abnormal returns at the time of subsequent announcements of quarterly earnings. This result suggests informed trading by institutions based on superior information about forthcoming earnings. The study also shows that the association is observed primarily for firms with low book to market value of equity and high levels of Ramp;D activity, measures of unrecorded intangible assets. These results are consistent with such firms being good candidates for productive information search and interpretation by institutional investors because accounting numbers of such firms provide relatively less value-relevant information.
Author: Xiaorong Ma Publisher: ISBN: 9781360996561 Category : Languages : en Pages :
Book Description
This dissertation, "Three Essays on Information Production and Monitoring Role of Institutional Investors" by Xiaorong, Ma, 马笑蓉, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis includes one essay about the information production of institutional investors and two essays about the monitoring role of institutional investors. The first essay empirically examines the association between investor base and information production in the context of stock splits. Using the proportion of 13F filers as the proxy for the size of investor base, we show that three proxies for stock price informativeness, adjusted probability of information-based trading (AdjPIN), price non-synchronicity and probability of information-based trading (PIN), decrease significantly due to enlarged investor base after stock splits. It suggests that institutional investors are less incentivized to gather firm specific information when firm''s investor base expands, which is consistent with the "risk sharing hypothesis," proposed by Peress (2010). Furthermore, we find that the change of the price informativeness around splits is negatively related to the magnitude of positive return drifts following splits. This result is consistent with the notion that less information incorporated in stock prices results in a sluggish response by the market to corporate event. The second essay empirically identifies an external corporate governance mechanism through which the institutional trading improves firm value and disciplines managers from conducting value-destroying behaviors. We propose a reward-punishment intensity (RPI) measure based on institutional investors'' absolute position changes, and find it is positively associated with firm''s subsequent Tobin''s Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. It suggests that the improved firm values can be attributed to the discipline effect of institutional trading on managers, which is in line with the argument of "Governance Through Trading." Furthermore, we find that the exogenous liquidity shock of decimalization augments the governance effect of institutional trading. We also find that the discipline effect is more pronounced for firms with lower institutional ownership concentration, higher stock liquidity, and higher managers'' wealth-performance sensitivity, which further supports the notion that institutional trading could exert discipline on a manager. The third essay focuses on a particular type of institutional investor, short sellers, and explores the discipline effect of short selling on managerial empire building. Employing short-selling data from 2002-2012, we find a significantly negative association between the lending supply in the short-selling market and the subsequent abnormal capital investment. Besides, we find a positively significant association between the lending supply and the mergers and acquisitions announcement returns of acquiring firms. These results suggest that the short-selling potential could deter managers from conducting over-investment and value-destroying acquisitions. In addition, the discipline effect is stronger for firms with higher managers'' wealth-performance-sensitivity, for firms with lower financial constraints, and for stock-financed acquisition deals. Finally, firms with higher lending supply also have higher Tobin''s Q in the subsequent year. These results indicate that short-selling is another important external governance force. DOI: 10.5353/th_b5066226 Subjects: Institutional i
Author: Roger M. Edelen Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
We examine institutional investor demand for stocks that are categorized as mispriced according to twelve well-known pricing anomalies. We find that institutional demand during the year prior to anomaly portfolio formation is typically on the wrong side of the anomalies' implied mispricing. That is, we find increases in institutional ownership for overvalued stocks and decreases in institutional ownership for undervalued stocks. Moreover, abnormal returns for all twelve anomalies are concentrated almost entirely in stocks with institutional demand on the wrong side. We consider several competing explanations for these puzzling results.
Author: Samuel H. Szewczyk Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study examines the motives for stock splits in the context of the announcing firm's institutional ownership. We report an inverse relationship between the magnitude of announcement period abnormal returns and the percentage of the firm's institutional ownership, indicating that stock splits are more valuable to firms with low institutional ownership. Results also suggest that the motivation for initiating stock splits is not uniform across firms; rather it is contingent upon the firm's pre-split institutional ownership. Firms with low pre-split institutional ownership experience significant increases in the number of institutional shareholders following stock splits. In contrast, firms with high pre-split institutional ownership stabilize the proportion of their shares owned by institutions following stock splits. Overall the evidence suggests that announcements of stock splits attract the attention of financial analysts to undervalued firms and induce changes in post-split institutional ownership.
Author: Silver Chung Publisher: ISBN: Category : Business enterprises Languages : en Pages : 79
Book Description
"Managers have substantial discretion in when to announce earnings during the day. While the prior literature has shown that the timing of announcements during the day can affect the stock market's reaction to earnings news, there is either mixed or weak empirical evidence on why a manager chooses a certain time of the day to announce earnings. In this paper, I examine whether institutional ownership affects firms' decisions to announce earnings after hours (AH). AH are largely dominated by institutional investors who better understand the implications of earnings news for firm value and stock prices. I argue that firms with greater institutional ownership announce earnings AH to promote institutional investors' trading, and therefore facilitate post-announcement price discovery and reduce price volatility. Using the annual reconstitution of the Russell 1000 and 2000 indexes which provides plausibly exogenous variation in institutional ownership, I find that firms with higher institutional ownership are more likely to announce earnings during an aftermarket session (i.e., AH after the market closes), but not during a premarket session (i.e., AH before the market opens). My analysis further shows that transient institutional ownership has a stronger influence on the likelihood of after-market announcements relative to quasi-indexer and dedicated institutional holdings, and that the effect of institutional ownership on the announcement timing is more pronounced when firms have bad earnings news or large transitory earnings components. Lastly, I find that announcing earnings during an after-market session indeed facilitates the post-announcement price discovery and reduces price volatility for firms with greater institutional ownership. Collectively, my findings suggest that institutional ownership influences firms' earnings announcement timing decisions"--Pages vii-viii.
Author: Ashiq Ali
Author: Ashiq Ali
Author: Yawen Jiao
Author: Ashiq Ali
Author: Jimmy Douglas Senteza
Author: Xiaorong Ma
Author: Roger M. Edelen
Author: VICTOR L. BERNARD
Author: John Y. Campbell
Author: Samuel H. Szewczyk
Author: Silver Chung