Institutional Ownership, Peer Pressure and Voluntary Disclosures

Posted: 26 May 2021

See all articles by Yupeng Lin

Yupeng Lin

National University of Singapore

Ying Mao

Lingnan University

Zheng Wang

City University of Hong Kong

Date Written: May 1, 2017

Abstract

We document peer effect as an important factor in determining corporate voluntary disclosure policies. Our identification strategy relies on a discontinuity in the distribution of institutional ownership caused by the annual Russell 1000/2000 index reconstitution. Around the threshold of the Russell 1000/2000 index, the top Russell 2000 index firms experience a significant jump in institutional ownership compared with their closely-neighbored bottom Russell 1000 index firms due to index funds' benchmarking strategies. The increase in institutional ownership and resultant improvement in the information environment of the top Russell 2000 index firms create pressures on their industry peers to increase voluntary disclosures. Consistent with this prediction, we find that the discontinuously higher institutional ownership of the top Russell 2000 index firms significantly increases industry peers' likelihood and frequency of issuing management forecasts. Further analyses show that such an effect could be driven by firms' incentive to compete for capital.

Keywords: Institutional ownership, Peer effect, Voluntary disclosures, Russell index

JEL Classification: M41, G23

Suggested Citation

Lin, Yupeng and Mao, Ying and Wang, Zheng, Institutional Ownership, Peer Pressure and Voluntary Disclosures (May 1, 2017). The Accounting Review 2017, Available at SSRN: https://ssrn.com/abstract=3027607

Yupeng Lin

National University of Singapore ( email )

15 Kent ridge drive
Singapore
Singapore

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

Ying Mao

Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

Zheng Wang (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

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