Abstract
Utama and Cready [Utama, S., Cready, W.M., 1997. Institutional ownership, differential predisclosure precision and trading volume at announcement dates. Journal of Accounting and Economics 24, 129-150] use total institutional ownership to proxy for the proportion of better-informed traders, an important determinant of trading around earnings announcements. We argue that institutions holding small stakes cannot justify the fixed cost of developing private predisclosure information. Also, institutions with large stakes generally do not trade around earnings announcements since they are dedicated investors or face regulations that make informed trading difficult. However, institutions holding medium stakes have incentives to develop private predisclosure information and trade on it; we show that their ownership is a finer proxy for the proportion of better-informed traders at earnings announcements.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 47-61 |
| Number of pages | 15 |
| Journal | Journal of Accounting and Economics |
| Volume | 46 |
| Issue number | 1 |
| DOIs | |
| State | Published - Sep 2008 |
Keywords
- Better-informed traders
- Differential precision of private
- Institutional ownership
- Institutional stakeholding
- Predisclosure information
- Trading volume at earnings announcements
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics