Leveling the Playing Field: Financial Regulation and Disappearing Local Bias of Institutional Investors
Singapore Management University - Lee Kong Chian School of Business
University of Miami - School of Business Administration
National University of Singapore (NUS) - Department of Finance; Southern Methodist University (SMU) - Edwin L. Cox School of Business
September 9, 2014
This study examines the link between firms' information environment and the investment decisions of local institutional investors. The local bias and informational advantage of institutional investors around corporate headquarters decline sharply following the adoption of Regulation Fair Disclosure and the Sarbanes-Oxley Act. The decline in local ownership is more salient among firms whose information environment was more opaque before the regulatory changes. At the aggregate market level, the degree of informed trading attributed to local investors also declines. Similar patterns are observed among sell-side equity analysts. Overall, the evidence is consistent with regulatory changes curtailing geographical-based informational advantage.
Number of Pages in PDF File: 55working papers series
Date posted: April 13, 2011 ; Last revised: September 10, 2014
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