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Financial reporting opacity and informed trading by international institutional investors

  • Maffett, Mark
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    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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    File URL: http://www.sciencedirect.com/science/article/pii/S0165410112000638
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/jae

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