The association between institutional ownership and trading volume reaction to annual earnings announcements /
The study empirically investigates the relationship between
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| Format: | Thesis Book |
| Language: | English |
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[Place of publication not identified] :
[publisher not identified] ;
1996.
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| Subjects: | |
| Online Access: | http://proxy.library.tamu.edu/login?url=http://proquest.umi.com/pqdweb?did=743149251&sid=1&Fmt=2&clientId=2945&RQT=309&VName=PQD |
| Summary: | The study empirically investigates the relationship between ownership structure, as revealed by the percentage of outstanding shares held by institutional investors, and trading volume responses to annual earnings announcements. Kim and Verrecchia (1991a) theoretically propose that trading volume reaction in response to public announcements is an increasing function of the degree of differential precision of private predisclosure information across investors. This study builds on theirs by proposing that the relation between trading volume reaction to earnings announcements and institutional ownership is influenced by the difference in the precision of private predisclosure information between institutions and individuals. Prior studies suggest that institutional investors are better informed and have more precise private information than individual investors. It follows that the extent of institutional ownership determines the degree of differential precision across investors and therefore influences trading volume. The study develops a model that introduces two investor classes (individual and institutional investors) who differ, on average, in terms of the precision of their private predisclosure information. The model allows precision to vary within each investor class and it investigates how ownership structure influences the overall variation in the precision of private predisclosure information. The model shows that the relationship between ownership structure is expected to be quadratic with the quadratic curve having an inverted U-shape. The regression results show a strong quadratic relation between institutional ownership and trading volume response. The results are robust with respect to alternative forms of the empirical modells specification. The findings are consistent with Kim and Verrecchia's theoretical proposition that trading volume reaction to public announcements is an increasing function of the differential precision across investors' private predisclosure information. Further, the study finds that the difference in the precision of private predisclosure information between institutions and individuals is more pronounced in firms with a restricted analyst following. |
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| Item Description: | Vita. "Major Subject: Accounting". |
| Physical Description: | x, 110 leaves : illustrations ; 28 cm. Issued also on microfiche from University Microfilms Inc. |
| Bibliography: | Includes bibliographical references. |