Institutional Investor Attention and Firm Disclosure

Abramova, Inna and Core, John and Sutherland, Andrew (2019): Institutional Investor Attention and Firm Disclosure.

Abstract

We study how short-term changes in institutional owner attention affect managers’ short-term disclosure choices. Holding institutional ownership constant and controlling for industry-quarter effects, we find that managers respond to attention by increasing the number of forecasts and 8-K filings. Rather than alter the decision of whether to forecast or to provide more informative disclosures, attention causes minor disclosure adjustments. Although attention explains significant variation in the quantity of disclosure, we find little change in abnormal volume and volatility, the bid-ask spread, or depth. Overall, our evidence suggests that management responds to temporary institutional investor attention by making disclosures that have little effect on information quality or liquidity.

• Item Type: MPRA Paper
• Language: English
• Keywords: disclosure, management forecasts, 8-K filings, information quality, liquidity, institutional ownership, passive investors, corporate governance, monitoring
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance

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This appendix provides definitions for variables used throughout the paper. Distraction Variables Description Distraction Based on the Kempf et al. 2017 investor distraction measure. Distraction is calculated using the following equation: