Looking for Transparency: Institutional Ownership and Innovation Disclosure

18 Pages Posted: 8 Mar 2018

See all articles by Iván Blanco

Iván Blanco

CUNEF

Sergio García

University of the Balearic Islands

David Wehrheim

IESE Business School

Date Written: February 28, 2018

Abstract

We exploit the passage of the American Investor Protection Act of 1999 (AIPA) as an exogenous shock to the informational environment of the firm and investigate institutional investors' preferences for information and firm disclosure. We find that more innovation disclosure causes an increase in firm-level institutional ownership of around 11%. This increase is mostly concentrated in institutions that actively trade on information (dedicated, quasi-indexers, short-term owners). By benefiting these institutions, innovation disclosure seems to enlarge the adverse selection gap between informed and uninformed market participants. Finally, we provide evidence suggesting a substitution effect between the degree of information disclosure to shareholders and the power they demand inside the corporation.

Keywords: Institutional Ownership, Information Disclosure, American Inventors Protection Act, Adverse Selection

JEL Classification: G14, G20, G30, G32

Suggested Citation

Blanco, Iván and García, Sergio and Wehrheim, David, Looking for Transparency: Institutional Ownership and Innovation Disclosure (February 28, 2018). 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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