Informed Trading by Institutions and Quality of Accounting Information

Posted: 27 Dec 2000

See all articles by Ashiq Ali

Ashiq Ali

University of Texas at Dallas - Naveen Jindal School of Management

Cindy Durtschi

DePaul University - School of Accountancy and MIS

Baruch Lev

New York University - Stern School of Business

Mark A. Trombley

University of Arizona - Eller College of Management

Date Written: October 2000

Abstract

This study documents that change in institutional ownership of a company during a calendar quarter is associated with abnormal returns at the time of subsequent announcements of quarterly earnings. This result suggests informed trading by institutions based on superior information about forthcoming earnings. The study also shows that the association is observed primarily for firms with low book to market value of equity and high levels of R&D activity, measures of unrecorded intangible assets. These results are consistent with such firms being good candidates for productive information search and interpretation by institutional investors because accounting numbers of such firms provide relatively less value-relevant information.

Keywords: Institutional trading, earnings accouncements, selective disclosure

JEL Classification: G14, G24, G32, M41

Suggested Citation

Ali, Ashiq and Durtschi, Cindy and Lev, Baruch Itamar and Trombley, Mark A., Informed Trading by Institutions and Quality of Accounting Information (October 2000). Available at SSRN: https://ssrn.com/abstract=247506

Ashiq Ali (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Road, SM41
Richardson, TX 75080-3021
United States
972-883-6360 (Phone)
972-883-6811 (Fax)

HOME PAGE: http://www.utdallas.edu/~axa042200/

Cindy Durtschi

DePaul University - School of Accountancy and MIS ( email )

Chicago, IL 60604
United States
312-362-8789 (Phone)

Baruch Itamar Lev

New York University - Stern School of Business ( email )

40 West 4th Street, Suite 400
New York, NY 10012
United States
212-998-0028 (Phone)
212-995-4001 (Fax)

HOME PAGE: http://www.baruch-lev.com

Mark A. Trombley

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-4805 (Phone)
520-621-3742 (Fax)

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