Do Neglected Firms Suffer from an Information Deficit?

The International Journal of Business and Finance Research, v. 7 (1) p. 31-44

14 Pages Posted: 29 Jan 2013

See all articles by Kenneth Yung

Kenneth Yung

Old Dominion University - Finance

Hamid Rahman

Alliant International University

Qian Sun

Kutztown University

Date Written: 2013

Abstract

We study the presence and distribution of private information in neglected firm stocks using a measure of private information first suggested by Roll (1988). Our results suggest that there is no shortage of information on neglected firms for investors and that this private information forms part of the decision set for managerial decisions. Our results indicate a significant negative correlation between the amount of private information and certain important firm characteristics such as market size, cash flow, sales and return on assets. When the impact of private information is analyzed on the investment and payout policies of the neglected firms, the results indicate that private information in stock price has a significant impact on firm investment but not on payout. However, private information does affect payout but through interaction with firm cash flow. Finally we find that private information impact on firm investment is stronger in smaller as compared to larger neglected firms.

Keywords: Neglected stocks, Neglected firms, information deficit

JEL Classification: G14, G35

Suggested Citation

Yung, Kenneth and Rahman, Hamid and Sun, Qian, Do Neglected Firms Suffer from an Information Deficit? (2013). The International Journal of Business and Finance Research, v. 7 (1) p. 31-44. Available at SSRN: https://ssrn.com/abstract=2148681

Kenneth Yung (Contact Author)

Old Dominion University - Finance ( email )

School of Business and Public Administration
Norfolk, VA 23529-0222
United States
757-683-3573 (Phone)

Hamid Rahman

Alliant International University ( email )

10455 Pomerado Road
San Diego, CA 92131-1799
United States
8586354529 (Phone)

Qian Sun

Kutztown University

Kutztown, PA 19530
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
40
Abstract Views
928
PlumX Metrics