Do Mutual Funds Have Information Advantage? Evidence from Seasoned Equity Offerings in China

10 Pages Posted: 25 Apr 2014

See all articles by Erwei Xiang

Erwei Xiang

Murdoch University

Gloria Yuan Tian

University of Lethbridge Calgary Campus; Financial Research Network (FIRN)

Fan Yang

University of Saskatchewan

Zhiyuan Liu

Nankai University - Department of Accounting

Date Written: January 07, 2013

Abstract

By integrating the literature on institutional investors with that on seasoned equity offerings (SEOs), this paper investigates the role played by mutual funds around SEO announcements in China. To the extent that shareholdings already held by mutual funds in a firm prior to the firm's SEO issuance represent funds' information advantage, our first finding suggests a positive association between such information advantage and funds' decision to participate in certain SEOs. Second,we find that certain SEO firms that have attracted fund participation at issuance outperform peer firms without fund involvement when performance is proxied for by accounting-based measures. Collectively, our findings are consistent with the notion that mutual funds have an information advantage over other types of investors, and such an advantage would allow them to be able to invest in the "right" SEOs.

Keywords: Mutual funds, Seasoned equity offerings, Information advantage, Firm performance

JEL Classification: G30

Suggested Citation

Xiang, Erwei and Tian, Gloria Yuan and Yang, Fan and Liu, Zhiyuan, Do Mutual Funds Have Information Advantage? Evidence from Seasoned Equity Offerings in China (January 07, 2013). International Review of Financial Analysis, Vol. 30, 2014. Available at SSRN: https://ssrn.com/abstract=2428330

Erwei Xiang

Murdoch University

Murdoch, WA 6150
Australia

Gloria Yuan Tian (Contact Author)

University of Lethbridge Calgary Campus ( email )

6th floor, 345 - 6 Ave SE
Calgary, Alberta T2G 4V1
Canada

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Fan Yang

University of Saskatchewan ( email )

College of Education
Saskatoon, Saskatchewan S7N 5A7
Canada

Zhiyuan Liu

Nankai University - Department of Accounting ( email )

94 Weijin Road, Nankai District
Tianjin, Tianjin 300071
China

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