Can long-term institutional owners improve market efficiency in parsing complex legal disputes?

Paul Borochin, Xiaoqiong Wang and Siqi Wei

International Review of Economics & Finance, 2024, vol. 96, issue PC

Abstract: Long-horizon institutional investors can help mitigate information asymmetries around securities class action (SCA) lawsuits. We find that the machine readability of SCA complaint filings can predict the outcome and duration of class actions. Long-term institutional investor ownership leads to a more positive post-SCA announcement price reaction and increases the volatility ratio of prices as a measure of price informativeness. Furthermore, there is a significant interaction effect between long-term institutional ownership and SCA complexity on price informativeness consistent with a superior information processing ability about complex corporate events affecting portfolio firms.

Keywords: Institutional ownership; Securities class actions; Market efficiency; Natural language processing (search for similar items in EconPapers)
JEL-codes: G14 G2 G30 K41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pc:s1059056024006828

DOI: 10.1016/j.iref.2024.103690

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