Fire-sales and Information Advantage: When Bank-Affiliation Helps

46 Pages Posted: 2 Jul 2012 Last revised: 30 Nov 2012

See all articles by Lei Zhang

Lei Zhang

University of Queensland - Business School

Massimo Massa

INSEAD - Finance

Date Written: July 1, 2012


We study how information flows within international financial conglomerates and how such a flow reduces the transmission of liquidity crisis due to fire-sales. We focus on the role of international institutional investors affiliated with banks during the 2008-2009 global financial crisis. We argue that affiliation with banks provides international asset managers with an information advantage that lowers their incentive to herd with the uninformed fire-sales as the crisis emerges. This effectively provides price support to foreign stocks. We test this intuition using a comprehensive sample of non-North American firms with detailed information on international institutional holdings. We show that bank affiliation provides an informational advantage that more than offsets the disadvantages of foreign investors due to geography. During the crisis, the bank-affiliated investors increase stock liquidity, reduce extreme negative return realizations, lower short-selling demand and increase price informativeness.

Keywords: fire sales, crisis, bank-affiliation, foreign ownership, liquidity

JEL Classification: G10, G15, G21

Suggested Citation

Zhang, Lei and Massa, Massimo, Fire-sales and Information Advantage: When Bank-Affiliation Helps (July 1, 2012). Available at SSRN: or

Lei Zhang (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

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