Firm Disclosure and Individual and Institutional Investors
46 Pages Posted: 14 Apr 2020 Last revised: 17 Nov 2023
Date Written: October 31, 2022
Abstract
We provide empirical evidence consistent with the hypothesis that the disclosures of firms temporarily increase the information asymmetries between individual and institutional investors, where the former are at an information disadvantage relative to the latter. Moreover, institutional investors seem to gain their information advantage because they are more able to bear the costs of extracting private information from firm disclosures. For the same reason, these investors appear to earn higher short-term returns than individual investors. Overall, these findings suggest that firms' disclosures are, at least temporarily, of a lower informational value to individual investors than they are to institutional investors.
Keywords: Firm disclosure, individual and institutional investors, disclosure-processing costs, information asymmetry
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