Information Environment and the Geography of Firms and Investors

53 Pages Posted: 16 Feb 2015 Last revised: 28 Jul 2016

See all articles by Gennaro Bernile

Gennaro Bernile

University of Miami - Department of Finance

Shimon Kogan

Massachusetts Institute of Technology (MIT) - Sloan School of Management; IDC Herzliya - Arison School of Business

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance

Date Written: July 28, 2015

Abstract

We develop a model linking stock ownership and returns to the distribution of private information and quality of public information. Supporting the model, we find that the firm’s information environment affects investors’ propensity to hold and trade its stocks, but its effects hinge on investors’ access to private information. Nearby investors with potential access decrease their holdings when private information becomes more dispersed and public information quality improves, whereas distant investors display opposite patterns. Tests exploiting exogenous shocks to firms’ information environments indicate these relations are causal. Moreover, firms’ information environments and proximity to potential investors jointly explain stock returns.

Keywords: Geography, Information Environment, Ownership, Trading, Stock Returns

JEL Classification: G11, G12, G14, G20

Suggested Citation

Bernile, Gennaro and Kogan, Shimon and Sulaeman, Johan, Information Environment and the Geography of Firms and Investors (July 28, 2015). 28th Australasian Finance and Banking Conference. Available at SSRN: https://ssrn.com/abstract=2565210 or http://dx.doi.org/10.2139/ssrn.2565210

Gennaro Bernile (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Shimon Kogan

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

IDC Herzliya - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://sites.google.com/site/johansulaeman/

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