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Financial Reporting Opacity and Informed Trading by International Institutional Investors

Mark G. Maffett

University of Chicago - Booth School of Business

July 30, 2012

Journal of Accounting & Economics (JAE), Forthcoming

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.

Number of Pages in PDF File: 44

Keywords: Transparency, Informed Trading, Institutional Investors, International Accounting

JEL Classification: G15, G30, M41

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Date posted: March 13, 2011 ; Last revised: September 25, 2012

Suggested Citation

Maffett, Mark G., Financial Reporting Opacity and Informed Trading by International Institutional Investors (July 30, 2012). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1783072 or http://dx.doi.org/10.2139/ssrn.1783072

Contact Information

Mark G. Maffett (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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