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Financial reporting opacity and informed trading by international institutional investors

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  • Maffett, Mark

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.

Suggested Citation

  • Maffett, Mark, 2012. "Financial reporting opacity and informed trading by international institutional investors," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 201-220.
  • Handle: RePEc:eee:jaecon:v:54:y:2012:i:2:p:201-220
    DOI: 10.1016/j.jacceco.2012.09.002
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    3. Linlin Ye, 2016. "Understanding the Impacts of Dark Pools on Price Discovery," Papers 1612.08486, arXiv.org.
    4. Bird, Robert C. & Borochin, Paul A. & Knopf, John D., 2015. "The role of the chief legal officer in corporate governance," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 1-22.
    5. 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.
    6. Suresh Nallareddy & Maria Ogneva, 0. "Accrual quality, skill, and the cross-section of mutual fund returns," Review of Accounting Studies, Springer, vol. 0, pages 1-40.
    7. Peter Fiechter & Zoltán Novotny-Farkas, 2017. "The impact of the institutional environment on the value relevance of fair values," Review of Accounting Studies, Springer, vol. 22(1), pages 392-429, March.
    8. Athanasakou, Vasiliki E. & Strong, Norman C & Walker, Martin, 2014. "The relative concentration of bad versus good news flows," LSE Research Online Documents on Economics 60139, London School of Economics and Political Science, LSE Library.
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    10. Lang, Mark & Stice-Lawrence, Lorien, 2015. "Textual analysis and international financial reporting: Large sample evidence," Journal of Accounting and Economics, Elsevier, vol. 60(2), pages 110-135.
    11. repec:pal:jintbs:v:48:y:2017:i:4:d:10.1057_s41267-016-0016-1 is not listed on IDEAS
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    More about this item

    Keywords

    Transparency; Informed trading; Institutional investors; International accounting;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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