Ownership Structure and Trading Volume Reaction to Earnings Announcements: Evidence from Japan
Pacific-Basin Finance Journal, Volume 6, Issues 1–2, May 1998, Pages 45–60
University of Alberta School of Business Research Paper No. 2013-1057
Posted: 2 Jul 2013
Date Written: June 1, 1997
Abstract
We investigate the impact of ownership structure on trading volume reaction to earnings announcements using a sample of Japanese companies. Our primary tests focus on differential trading activities carried out by three types of shareholders in response to earnings announcements: corporate stockholders, foreign investors, and ordinary domestic investors. We find that trading volume is negatively associated with the level of interlocking ownership which is designed to provide long-term stable relationships among members of Japanese corporate (keiretsu) groups. Furthermore, foreign investors are more responsive to earnings announcements than their domestic counterparts, and are sophisticated in selecting their investment targets. Our overall findings are consistent with the argument of Lev (1988) that disclosures of accounting information may not necessarily have the same value to various classes of investors.
Keywords: Earnings announcements, Keiretsu, Foreign investors, Trading volume
JEL Classification: F21, G32, M41
Suggested Citation: Suggested Citation
