Institutional Investors and Information Content of Earnings Announcements Over Time
35 Pages Posted: 21 Oct 2011
Date Written: October 19, 2011
The investor composition in the US stock market has been undergoing a dramatic shift towards greater institutional ownership. In this paper, we show that the increase in the stock ownership by institutions over time, especially those with focus on short-term performance, is positively related to the increase over time in stock market response to earnings announcements. Our findings offer an additional explanation to the increase over time in the information content of earnings announcements, and provide a rationale for the frequently expressed view by corporate managers that they are increasingly pressured to meet short-term earnings targets due to the fixation of their investors on near-term corporate performance.
Keywords: Information Content of Earnings Announcements, Institutional Investors, Concurrent Disclosure
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