Filing Speed, Information Leakage, and Price Formation

This study investigates the price discovery process in equity markets with informed institutional investors. Consistent with extant theories, we show empirically that institutional investors, in contrast to retail investors, trade based on the leaked sign of unanticipated news and then (partially) reverse their trades when the news become public. We also find that the longer the leakage period for institutional investors to exploit, the less informative is the news when it becomes public. These results are robust to controls for firm press releases and news articles and endogeneity concerns.

Keywords: Filing Lag, Institutional Trading, 8K reports, Private Information

JEL Classification: M41, G12, G14

Suggested Citation: Suggested Citation

Callen, Jeffrey L. and Kaniel, Ron and Segal, Dan, Filing Speed, Information Leakage, and Price Formation (February 13, 2022). Review of Accounting Studies, forthcoming, Rotman School of Management Working Paper No. 4033712, Available at SSRN: https://ssrn.com/abstract=4033712