Do Institutional Investors Demand Public Disclosure?

Andrew Bird, Stephen A. Karolyi
2016 The Review of financial studies  
We implement a regression discontinuity design to examine the effect of institutional ownership on corporate disclosure policy. With a novel, hand-collected data set encompassing every 8-K filing between 1996 and 2006, we find that positive shocks to institutional ownership around Russell index reconstitutions increase disclosure quantity, form, and quality. Firms just-added to the Russell 2000 index increase institutional ownership by 9.8%, and disclose 4.7% longer 8-K filings with 21.3% more
more » ... gs with 21.3% more embedded graphics. The increased disclosure is reflected in greater information content of 8-K filings as measured by analyst reactions, trading volume, and absolute announcement returns, which increase by 45.9%. * We thank Alan Crane, Andy Koch, Sebastien Michenaud, Marina Niessner, and Tom Ruchti for valuable comments and discussion. All remaining errors are ours.
doi:10.1093/rfs/hhw062 fatcat:36pyqlejd5dllplfv7klmthtke