Pre-Announcement and Event-Period Private Information: A Trading Volume Analysis of Firm Size and Institutional Ownership Effects

41 Pages Posted: 3 Oct 2005

See all articles by Richard A. Schneible Jr.

Richard A. Schneible Jr.

State University of New York (SUNY) at Albany

Douglas E. Stevens

Georgia State University - Robinson College of Business

Date Written: September 30, 2005

Abstract

We study cross-sectional differences in pre-announcement and event-period private information acquisition across firm size and institutional ownership using trading volume reactions to earnings announcements. We find that abnormal volume associated with absolute price change increases with both firm size and institutional ownership, suggesting that pre-announcement private information acquisition increases with firm size and institutional ownership. We also find that abnormal volume independent of absolute price change increases with institutional ownership, suggesting that event-period private information acquisition increases with institutional ownership. In contrast, abnormal volume independent of absolute price change decreases with firm size, reflecting the previously documented positive relation between firm size and the precision of pre-announcement public information. By demonstrating that firm size and institutional ownership are determinants of pre-announcement and event--period private information acquisition, this study provides new insights regarding the incentive to acquire private information around earnings announcements and helps explain prior empirical results in trading volume reaction studies.

Keywords: private information acquisition, firm size, institutional ownership, trading volume reaction

JEL Classification: D82, G10, M41

Suggested Citation

Schneible, Richard and Stevens, Douglas E., Pre-Announcement and Event-Period Private Information: A Trading Volume Analysis of Firm Size and Institutional Ownership Effects (September 30, 2005). Available at SSRN: https://ssrn.com/abstract=817565 or http://dx.doi.org/10.2139/ssrn.817565

Richard Schneible (Contact Author)

State University of New York (SUNY) at Albany ( email )

Albany, NY 12222
United States

Douglas E. Stevens

Georgia State University - Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States
404-413-7212 (Phone)
404-413-7203 (Fax)

HOME PAGE: http://robinson.gsu.edu/profile/douglas-e-stevens/

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