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Financial reporting opacity and informed trading by international institutional investors

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  • Maffett, Mark
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    Abstract

    Using cross-country data on trading by international mutual funds, I find that firms with more opaque information environments, as captured by firm- and country-level measures of the availability of financial reporting information, experience more privately informed trading by institutional investors. The association between firm-level opacity and informed trading is most pronounced where country-level disclosure infrastructures are less developed and for those investors for whom the incentives and opportunities to acquire private information are greatest. A difference-in-differences analysis of the returns earned by institutions in opaque stocks suggests that this information advantage is economically significant.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 54 (2012)
    Issue (Month): 2 ()
    Pages: 201-220

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    Handle: RePEc:eee:jaecon:v:54:y:2012:i:2:p:201-220

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    Web page: http://www.elsevier.com/locate/jae

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    Keywords: Transparency; Informed trading; Institutional investors; International accounting;

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    Cited by:
    1. Ding, Rong & Hou, Wenxuan & Kuo, Jing-Ming & Lee, Edward, 2013. "Fund ownership and stock price informativeness of Chinese listed firms," Journal of Multinational Financial Management, Elsevier, vol. 23(3), pages 166-185.

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