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Institutional Stakeholdings and Better-Informed Traders at Earnings Announcements


Ashiq Ali


University of Texas at Dallas - Naveen Jindal School of Management

Sandy Klasa


University of Arizona - Department of Finance

Oliver Zhen Li


National University of Singapore

February 2008

Journal of Accounting and Economics, Forthcoming

Abstract:     
Utama and Cready (1997) 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.

Number of Pages in PDF File: 44

Keywords: institutional investors, informed traders, trading volume

JEL Classification: G12, M41, G32

working papers series


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Date posted: June 3, 2004 ; Last revised: July 2, 2008

Suggested Citation

Ali, Ashiq and Klasa, Sandy and Li, Oliver Zhen, Institutional Stakeholdings and Better-Informed Traders at Earnings Announcements (February 2008). Journal of Accounting and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=554263 or http://dx.doi.org/10.2139/ssrn.554263

Contact Information

Ashiq Ali (Contact Author)
University of Texas at Dallas - Naveen Jindal School of Management ( email )
800 West Campbell Road, SM41
Richardson, TX 75080-3021
United States
972-883-6360 (Phone)
972-883-6811 (Fax)
HOME PAGE: http://www.utdallas.edu/~axa042200/
Sandy Klasa
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-8761 (Phone)
Oliver Zhen Li
National University of Singapore ( email )
Department of Accounting
Singapore
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