Financial Reporting Opacity and Informed Trading by International Institutional Investors

Download or read book Financial Reporting Opacity and Informed Trading by International Institutional Investors written by Mark G. Maffett and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using cross-country data on trading by international mutual funds, I find that firms with more opaque information environments, as captured by firm- and country-level measures of the availability of financial reporting information, experience more privately informed trading by institutional investors. The association between firm-level opacity and informed trading is most pronounced where country-level disclosure infrastructures are less developed and for those investors for whom the incentives and opportunities to acquire private information are greatest. A difference-in-differences analysis of the returns earned by institutions in opaque stocks suggests that this information advantage is economically significant.