Mandated disclosure, institutional investors and stock price informativeness: Evidence from a quasi-natural experiment

55 Pages Posted: 8 Mar 2018 Last revised: 24 Jul 2020

See all articles by Iván Blanco

Iván Blanco

CUNEF

Sergio García

University of the Balearic Islands

David Wehrheim

IESE Business School

Date Written: July 4, 2020

Abstract

We investigate the link between mandated disclosure and investor preferences using a regulatory change that required the disclosure of patent applications 18 months after filing. This change allows us to separate the disciplinary effect provided by disclosure from the information effect. Leveraging cross-sectional variation in exposure to the change, we find an increase in institutional ownership in the period prior to the information release, a reduction in blockholders' stakes, and an increase in trading by informed investors. Importantly, stock prices also become more informative. Our evidence implies that governance implications should be a central consideration for disclosure and reporting regulation.

Keywords: institutional ownership, monitoring costs, mandated disclosure, patents, corporate governance

JEL Classification: G14, G20, G30, G32

Suggested Citation

Blanco, Iván and García, Sergio and Wehrheim, David, Mandated disclosure, institutional investors and stock price informativeness: Evidence from a quasi-natural experiment (July 4, 2020). Available at SSRN: https://ssrn.com/abstract=3132494 or http://dx.doi.org/10.2139/ssrn.3132494

Iván Blanco

CUNEF ( email )

C/ Leonardo Prieto Castro, 2
Madrid, Madrid 28040
Spain

HOME PAGE: http://cunef.edu/

Sergio García (Contact Author)

University of the Balearic Islands

Crtra. Valldemossa, km 7.5
Ed. Jovellanos
Palma de Mallorca, Illles Balears 07122
Spain

David Wehrheim

IESE Business School ( email )

Camino Cerro del Águila, 3
Madrid, Madrid 28023
Spain

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