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Investor Overlap and Diffusion of Disclosure Practices

56 Pages Posted: 8 Sep 2010 Last revised: 25 Jul 2017

Michael J. Jung

New York University - Leonard N. Stern School of Business

Date Written: September 18, 2011


I develop and test an investor demand-driven explanation for why one firm’s change in voluntary disclosure behavior is subsequently emulated by some firms in the industry but not others. I focus on the overlap in institutional investor ownership between two firms as a mechanism by which a first-mover firm’s increase in disclosure prompts investors to seek a similar increase from a follower firm. Using 10-K market risk disclosures as my empirical setting, I find that a firm’s decision to follow a first-mover in providing more quantitative information than is required by the SEC is positively associated with an increase in investor overlap from the prior year. I also find that the association is stronger for overlap in large institutional investors, consistent with their greater influence over managers, and for firms where investor uncertainty is high. This association is found after controlling for the herding effect documented in prior studies and after addressing potential endogeneity concerns. Overall, this evidence provides new insight into patterns of intra-industry disclosure behavior and highlights investor overlap as a communication channel and feedback mechanism that helps facilitate the diffusion of disclosure practices.

Keywords: Voluntary Disclosure, Institutional Investors, Investor Overlap, Diffusion, Market Risk Disclosures

JEL Classification: M41

Suggested Citation

Jung, Michael J., Investor Overlap and Diffusion of Disclosure Practices (September 18, 2011). Review of Accounting Studies, March 2013, Volume 18, Issue 1, pp 167-206. Available at SSRN:

Michael J. Jung (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States
212-998-0193 (Phone)

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