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Accruals quality, information risk, and institutional investors’ trading behavior: Evidence from the Korean stock market

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  • Soon Kim, Kyung
  • Young Chung, Chune
  • Hwon Lee, Jin
  • Cho, Sangjun

Abstract

This study analyzes the effect of firm-specific information risk, measured by accruals quality, on the cost of capital using institutional investors’ trading behavior. Institutional investors in firms with lower accruals quality increase their net selling in later years. Furthermore, these investors’ net selling is relevant to the innate and discretionary factors of accruals quality. This relationship is stronger for foreign institutions than for domestic institutions, and it is mostly observed under favorable macroeconomic conditions. We do not observe this relationship for large business groups connected by shares.

Suggested Citation

  • Soon Kim, Kyung & Young Chung, Chune & Hwon Lee, Jin & Cho, Sangjun, 2020. "Accruals quality, information risk, and institutional investors’ trading behavior: Evidence from the Korean stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940819300567
    DOI: 10.1016/j.najef.2019.101081
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    1. Le, Ha Thi Thu & Vo, Xuan Vinh & Vo, Thi Thuc, 2021. "Accruals quality and the cost of debt: Evidence from Vietnam," International Review of Financial Analysis, Elsevier, vol. 76(C).
    2. Le, Ha Thi Thu & Tran, Ha Giang & Vo, Xuan Vinh, 2021. "Audit quality, accruals quality and the cost of equity in an emerging market: Evidence from Vietnam," International Review of Financial Analysis, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Accruals quality; Institutional investors’ trading behavior; Institution type; Macroeconomic condition; Business diversification;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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