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Do Institutional Investors Demand Public Disclosure?

50 Pages Posted: 9 Apr 2015 Last revised: 20 May 2016

Andrew Bird

Carnegie Mellon University

Stephen A. Karolyi

Carnegie Mellon University - David A. Tepper School of Business

Date Written: May 12, 2016

Abstract

We examine the effect of institutional ownership on corporate disclosure policy using a regression discontinuity design. Using novel data that encompasses every 8-K filing between 1996 and 2006, we find that positive shocks to institutional ownership around Russell index reconstitutions increase the quantity, form, and quality of disclosure. Compared to those at the bottom of the Russell 1000 index, firms at the top of the Russell 2000 index increase institutional ownership by 9.8%, and disclose 4.7% longer 8-K filings with 21.3% more embedded graphics. This incremental disclosure significantly increases the information content of 8-K filings for the market and for analysts.

Keywords: institutional ownership, disclosure policy, 8-K filings and characteristics, announcement returns

JEL Classification: G23, G30, G14

Suggested Citation

Bird, Andrew and Karolyi, Stephen A., Do Institutional Investors Demand Public Disclosure? (May 12, 2016). Available at SSRN: https://ssrn.com/abstract=2591481 or http://dx.doi.org/10.2139/ssrn.2591481

Andrew Bird

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Stephen Karolyi (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
4122682909 (Phone)

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