Institutional investors and acquisition targets

Firms with higher levels of institutional ownership are more likely to be acquired. This paper shows that this positive correlation is due to ownership endogeneity. Institutional investors are better informed investors and buy acquisition targets. After controlling for this ownership endogeneity, the presence of institutional investors reduces the probability of being acquired. Our result further shows that mutual funds or funds with high turnover rates are more likely to benefit from selective disclosure prior to Regulation Fair Disclosure and the presence of public pension funds increases the announcement premiums that targets receive, which indicates a monitoring effect.

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Do Analysts Follow Managers Who Switch Companies? An Analysis of Relationships in the Capital Markets

The Accounting Review ◽

10.2308/accr-50636 ◽

2013 ◽

Vol 89 (2) ◽

pp. 451-482 ◽

Cited By ~ 32

Author(s):

Francois Brochet ◽

Gregory S. Miller ◽

Suraj Srinivasan

Keyword(s):

Capital Markets ◽

Data Availability ◽

Professional Relationships ◽

Matched Sample ◽

Regulation Fair Disclosure ◽

Analyst Coverage ◽

Listed Firms ◽

Fair Disclosure ◽

Carry Over ◽

Selective Disclosure

ABSTRACT We examine the importance of professional relationships developed between analysts and managers by investigating analyst coverage decisions in the context of CEO and CFO moves between publicly listed firms. We find that top executive moves from an origin firm to a destination firm trigger analysts following the origin firm to initiate coverage of the destination firm in 10 percent of our sample, which is significantly higher than in a matched sample. Analyst-manager “co-migration” is significantly stronger when both firms are within the same industry. Analysts who move with managers to the destination firm exhibit more intense and accurate coverage of the origin firm than they do in other firms and compared to other analysts covering the origin firm. The advantage no longer holds after the executive's departure, and most of the analysts' advantage does not carry over to the destination firm. However, the analysts do increase the overall market capitalization of firms in their coverage portfolio. Our results hold after Regulation Fair Disclosure, suggesting that these relationships are not based on selective disclosure. Overall, the evidence shows both the importance and limitations of professional relationships in capital markets. Data Availability: Data are publicly available from sources identified in the article.

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The Impact of Regulation Fair Disclosure: Trading Costs and Information Asymmetry

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109000003045 ◽

2004 ◽

Vol 39 (2) ◽

pp. 209-225 ◽

Cited By ~ 157

Author(s):

Venkat R. Eleswarapu ◽

Rex Thompson ◽

Kumar Venkataraman

Keyword(s):

Information Asymmetry ◽

Securities And Exchange Commission ◽

Return Volatility ◽

Trading Costs ◽

Regulation Fair Disclosure ◽

Fair Disclosure ◽

Regulation Fd ◽

Material Information ◽

The Impact ◽

Selective Disclosure

AbstractIn October 2000, the Securities and Exchange Commission (SEC) passed Regulation Fair Disclosure (FD) in an effort to reduce selective disclosure of material information by firms to analysts and other investment professionals. We find that the information asymmetry reflected in trading costs at earnings announcements has declined after Regulation FD, with the decrease more pronounced for smaller and less liquid stocks. Return volatility around mandatory announcements is also lower but overall information flow is unchanged when mandatory and voluntary announcements are combined. Thus, the SEC appears to have diminished the advantage of informed investors, without increasing volatility.

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The Impact of Public Pension Funds and Other Limited Partners on the Governance of Venture Capital Funds

Quarterly Journal of Finance ◽

10.1142/s2010139219400032 ◽

2019 ◽

Vol 09 (01) ◽

pp. 1940003

Author(s):

Vladimir Atanasov ◽

Thomas Hall ◽

Vladimir Ivanov ◽

Katherine Litvak

Keyword(s):

Venture Capital ◽

Institutional Investors ◽

Pension Fund ◽

Pension Funds ◽

Public Pension ◽

Venture Capitalists ◽

Detailed Data ◽

Triple Difference ◽

The Impact ◽

Investment Choices

We examine whether the reinvestment choices of public pension funds (PPFs) affect the governance of venture capital funds. We start with a hand-collected dataset of litigation against venture capitalists (VCs) that provides significant shocks to the reputation of VCs. We combine that information with detailed data on limited partner investments in VCs provided by LP Source and test whether PPFs respond differently to the litigation shocks compared to other types of limited partners. Our triple-difference framework reveals that VCs who were defendants in lawsuits suffer a significant subsequent decline in investment by university endowments and several other types of institutional investors, but experience an increase in the investment share of PPFs. Pension funds are about three times more likely to re-invest in post-lawsuit funds offered by litigated VCs. The additional pension fund investments thus partially compensate for the shortfall in post-lawsuit fundraising caused by the exodus of other investors. Our results indicate that the investment choices of PPF managers reduce the effectiveness of reputational penalties imposed by other limited partners in venture capital funds.

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Institutional Ownership Composition and Earnings Management

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091512500221 ◽

2012 ◽

Vol 15 (04) ◽

pp. 1250022 ◽

Cited By ~ 11

Author(s):

Ling Lin ◽

Pavinee Manowan

Keyword(s):

Earnings Management ◽

Institutional Investors ◽

Institutional Ownership ◽

High Turnover ◽

Management Scenario ◽

Accounting Accruals ◽

Block Holders ◽

Ownership Composition ◽

The Impact ◽

The Relationship

This paper examines the impact of outside block-holders on earnings management, using discretionary accounting accruals as the measure of earnings management. For the income-decreasing earnings management scenario, we do not find significant results. This may be attributable to the different natures and time horizons of outside block-holders. Since the majority of outside block-holders are institutional investors, we then investigate the relationship between ownership by institutional investors with different natures and earnings management. Specifically, we find a significant positive relationship between ownership by transient institutional investors (holding diversified portfolios with high turnover) and discretionary accounting accruals. However, we do not find a significant relationship between ownership by dedicated institutional investors (holding concentrated portfolios with low turnover) and discretionary accounting accruals. Therefore, due to the differing natures of institutional investors, we may not treat them as a homogeneous group.

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Did Regulation Fair Disclosure Prevent Selective Disclosure? Direct Evidence from Intraday Volume and Returns

SSRN Electronic Journal ◽

10.2139/ssrn.2803308 ◽

2016 ◽

Cited By ~ 1

Author(s):

John L. Campbell ◽

Benjamin C. Whipple

Keyword(s):

Direct Evidence ◽

Regulation Fair Disclosure ◽

Fair Disclosure ◽

Selective Disclosure

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The Influence of Disclosure Regulation on Selective Disclosure: Impact on Difficult-to-Measure Reporting Activities and the Importance of Assurance Services

Accounting and the Public Interest ◽

10.2308/api.2006.6.1.70 ◽

2006 ◽

Vol 6 (1) ◽

pp. 70-94 ◽

Cited By ~ 1

Author(s):

Diane J. Janvrin ◽

James M. Kurtenbach

Keyword(s):

Financial Information ◽

Corporate Disclosure ◽

Regulation Fair Disclosure ◽

Disclosure Regulation ◽

The Public ◽

Market Participants ◽

Fair Disclosure ◽

Phone Calls ◽

Assurance Services ◽

Selective Disclosure

The objective of recent disclosure regulation (e.g., Regulation Fair Disclosure [FD]) is to reduce selective disclosure, the practice of releasing financial information to selected users before publicly disclosing the information. Prior to FD, providers used narrow distribution reporting activities, such as phone calls and one-on-one meetings with analysts, reviews of analysts' earnings estimates, and analysts' contracts with suppliers and firm employees, to communicate private financial information to selected users at the expense of uninformed users. Public interest theorists view regulation as a means to protect the public. We predict that if FD is effective, providers will move away from narrow reporting activities and reduce the probability that selected users can achieve a competitive advantage over the general investing public. In addition, assuming that reducing selective disclosure increases the number of market participants receiving information, we argue that the importance of assurance services will increase since FD (1) reduces users' ability to evaluate the credibility of provider information based on personal relationships with providers, and (2) increases the pressure on provider investor relations personnel to monitor the amount and credibility of information disclosed to decrease the likelihood that market participants view the information released as unreliable. Due to the lack of available empirical data related to narrow reporting activities and the importance of assurance services, we employ a field-based questionnaire of providers and users to address these issues. Results indicate that (1) providers and users perceive that narrow distribution reporting activities still exist, and (2) reducing users' personal access to providers may increase the importance of assurance services. The study increases our understanding of how regulation to reduce selective disclosure may protect the public by examining its impact on corporate disclosure activities and policies.

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