Institutional stakeholdings and better-informed traders at earnings announcements

Utama and Cready [Utama, S., Cready, W.M., 1997. Institutional ownership, differential predisclosure precision and trading volume at announcement dates. Journal of Accounting and Economics 24, 129–150] use total institutional ownership to proxy for the proportion of better-informed traders, an impor...

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Bibliographic Details
Published in:Journal of accounting & economics 2008-09, Vol.46 (1), p.47-61
Main Authors: Ali, Ashiq, Klasa, Sandy, Zhen Li, Oliver
Format: Article
Language:English
Subjects:
Better-informed traders
Better-informed traders Institutional stakeholding Institutional ownership Differential precision of private predisclosure information Trading volume at earnings announcements
Business studies
Differential precision of private predisclosure information
Financial accounting
Financial information
Financial reporting
Institutional ownership
Institutional stakeholding
Institutions
Ownership and control
Trading volume at earnings announcements
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Summary:Utama and Cready [Utama, S., Cready, W.M., 1997. Institutional ownership, differential predisclosure precision and trading volume at announcement dates. Journal of Accounting and Economics 24, 129–150] use total institutional ownership to proxy for the proportion of better-informed traders, an important determinant of trading around earnings announcements. We argue that institutions holding small stakes cannot justify the fixed cost of developing private predisclosure information. Also, institutions with large stakes generally do not trade around earnings announcements since they are dedicated investors or face regulations that make informed trading difficult. However, institutions holding medium stakes have incentives to develop private predisclosure information and trade on it; we show that their ownership is a finer proxy for the proportion of better-informed traders at earnings announcements.
ISSN:0165-4101
1879-1980
DOI:10.1016/j.jacceco.2008.06.001