Do mutual funds have information advantage? Evidence from seasoned equity offerings in China

Erwei Xiang, Gloria Y. Tian, Fan Yang and Zhiyuan Liu

International Review of Financial Analysis, 2014, vol. 31, issue C, 70-79

Abstract: By integrating the literature on institutional investors with that on seasoned equity offerings (SEOs), this paper investigates the role played by mutual funds around SEO announcements in China. To the extent that shareholdings already held by mutual funds in a firm prior to the firm's SEO issuance represent funds' information advantage, our first finding suggests a positive association between such information advantage and funds' decision to participate in certain SEOs. Second, we find that certain SEO firms that have attracted fund participation at issuance outperform peer firms without fund involvement when performance is proxied for by accounting-based measures. Collectively, our findings are consistent with the notion that mutual funds have an information advantage over other types of investors, and such an advantage would allow them to be able to invest in the “right” SEOs.

Keywords: Mutual funds; Seasoned equity offerings; Information advantage; Firm performance (search for similar items in EconPapers)
JEL-codes: G15 G23 G30 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:31:y:2014:i:c:p:70-79

DOI: 10.1016/j.irfa.2013.10.007

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