Common ownership, price informativeness, and corporate investment

In Ji Jang, Namho Kang and Ari Yezegel

Journal of Banking & Finance, 2022, vol. 135, issue C

Abstract: Using financial institution mergers as exogenous shocks to common ownership, we find that stock prices of commonly held firms incorporate future earnings news more quickly and are less sensitive to noise trades. Our analyses show that the increase in price informativeness is associated with: (1) increases in disclosure, (2) enhanced information production and diffusion, and (3) active trading by common owners. Further, we find that the investment sensitivity to Tobin's Q for commonly held firms is higher, indicating that managers of such firms rely more on market prices for information. These results are robust to controlling for the financial crisis, and to alternative control groups. Our findings suggest that common ownership has a positive effect on information production and influences real corporate decision by improving price informativeness.

Keywords: Common ownership; Market efficiency; Investment; Information acquisition (search for similar items in EconPapers)
JEL-codes: G14 G2 G31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426621003241
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:135:y:2022:i:c:s0378426621003241

DOI: 10.1016/j.jbankfin.2021.106373

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().