Does Shareholder Composition Matter? Evidence from the Market Reaction to Corporate Earnings Announcements

Posted: 5 Nov 2003

See all articles by Edith S. Hotchkiss

Edith S. Hotchkiss

Boston College - Carroll School of Management

Deon Strickland

Arizona State University (ASU) - Finance Department

Abstract

We examine whether institutional ownership composition is related to parameters of the market reaction to negative earnings announcements. When firms report earnings below analysts' expectations, the stock price response is more negative for firms with higher levels of ownership by momentum or aggressive growth investors. There is no evidence, however, that these institutions cause an "overreaction" to earnings news. Ownership structure is also related to trading volume and to stock price volatility on days around earnings announcements. Our findings are consistent with the idea that the composition of institutional shareholders effects stock price behavior around the release of corporate information.

Suggested Citation

Hotchkiss, Edith S. and Strickland, Deon, Does Shareholder Composition Matter? Evidence from the Market Reaction to Corporate Earnings Announcements. Journal of Finance, Vol. 58, pp. 1469-1498, August 2003. Available at SSRN: https://ssrn.com/abstract=424750

Edith S. Hotchkiss (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Department of Finance Fulton Hall, Room 330
Chestnut Hill, MA 02467
United States
617-552-3240 (Phone)
617-552-0431 (Fax)

Deon Strickland

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://wpcarey.asu.edu/directory/stafffaculty.cfm?cobid=2168669

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