Corporate Disclosure Quality and Institutional Investors' Holdings During Market Downturns

50 Pages Posted: 5 Oct 2018 Last revised: 8 Jan 2021

See all articles by Hua Cheng

Hua Cheng

University of Texas at Austin

Dayong Huang

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics

Yan Luo

Fudan University - School of Management

Date Written: August 1, 2018

Abstract

We find that transient institutions, characterized by diversified portfolios with high turnover, are attracted by the larger liquidity and increase their holdings in firms with higher quality of financial statements and thus boost these stock prices during market downturns. Therefore, transient institutions are helping hands in periods with possibly urgent needs of financing. This effect increases after the implementation of Reg FD, suggesting that these institutions rely more on the quality of financial statements after selected disclosure is no longer available. Moreover, we also find that the average effect of disclosure quality on transient institutions' holdings increases after Reg FD, whereas this effect declines sharply for dedicated institutions, characterized by low turnover and more concentrated holdings.

Suggested Citation

Cheng, Hua and Huang, Dayong and Luo, Yan, Corporate Disclosure Quality and Institutional Investors' Holdings During Market Downturns (August 1, 2018). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3248246 or http://dx.doi.org/10.2139/ssrn.3248246

Hua Cheng (Contact Author)

University of Texas at Austin ( email )

2317 Speedway
Austin, TX Texas 78712
United States

Dayong Huang

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

HOME PAGE: http://sites.google.com/a/uncg.edu/dayong-huang/

Yan Luo

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

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