Fund ownership and stock price informativeness of Chinese listed firms

Rong Ding, Wenxuan Hou, Jing-Ming Kuo and Edward Lee

Journal of Multinational Financial Management, 2013, vol. 23, issue 3, 166-185

Abstract: We examine the impact of mutual fund ownership on stock price informativeness in China. Existing evidence shows that stock price informativeness is low in China, and attributes this to firms’ lack of disclosure incentives under the weak investor protection institutional environment. Mutual funds are more sophisticated and influential than individual investors to monitor firms, and thus serve as an external governance mechanism to improve corporate transparency. However, the impact of mutual funds in China can also be moderated by state ownership of listed firms, which reduces firms’ dependence on outside investors for capital. Indeed, we find that mutual fund ownership is positively related to share price informativeness, but this effect is less pronounced among state-controlled firms. The main policy implication from our findings is that mutual funds contribute to the corporate information environment of emerging economies but further privatization of listed firms would be needed to realize greater benefit.

Keywords: Share price informativeness; Mutual funds; State ownership; Ownership structure; China (search for similar items in EconPapers)
JEL-codes: G14 G15 G30 G38 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:23:y:2013:i:3:p:166-185

DOI: 10.1016/j.mulfin.2013.03.003

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