TY - JOUR
T1 - Fund Ownership and Stock Price Informativeness of Chinese Listed Firms
AU - Ding, Rong
AU - Hou, Wenxuan
AU - Kuo, Jing-Ming
AU - Lee, Edward
PY - 2013
Y1 - 2013
N2 - We examine the impact of mutual fund ownership on stock price informativeness in China. Existing evidence shows that stock price informativeness is low in China, and attributes this to firms’ lack of disclosure incentives under the weak investor protection institutional environment. Mutual funds are more sophisticated and influential than individual investors to monitor firms, and thus serve as an external governance mechanism to improve corporate transparency. However, the impact of mutual funds in China can also be moderated by state ownership of listed firms, which reduces firms’ dependence on outside investors for capital. Indeed, we find that mutual fund ownership is positively related to share price informativeness, but this effect is less pronounced among state-controlled firms. The main policy implication from our findings is that mutual funds contribute to the corporate information environment of emerging economies but further privatization of listed firms would be needed to realize greater benefit.
AB - We examine the impact of mutual fund ownership on stock price informativeness in China. Existing evidence shows that stock price informativeness is low in China, and attributes this to firms’ lack of disclosure incentives under the weak investor protection institutional environment. Mutual funds are more sophisticated and influential than individual investors to monitor firms, and thus serve as an external governance mechanism to improve corporate transparency. However, the impact of mutual funds in China can also be moderated by state ownership of listed firms, which reduces firms’ dependence on outside investors for capital. Indeed, we find that mutual fund ownership is positively related to share price informativeness, but this effect is less pronounced among state-controlled firms. The main policy implication from our findings is that mutual funds contribute to the corporate information environment of emerging economies but further privatization of listed firms would be needed to realize greater benefit.
U2 - 10.1016/j.mulfin.2013.03.003
DO - 10.1016/j.mulfin.2013.03.003
M3 - Article
VL - 23
SP - 166
EP - 185
JO - Journal of Multinational Financial Management
JF - Journal of Multinational Financial Management
SN - 1042-444X
IS - 3
ER -