Affiliation:
1. Massachusetts Institute of Technology
Abstract
ABSTRACT
Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical proxies for competition using the number and concentration of institutional investor ownership. Using these proxies, we find a lower pricing of information asymmetry when there is more competition. Overall, our results suggest that competition between informed investors has an important effect on how the information environment affects the cost of capital.
JEL Classifications: G12; G14.
Publisher
American Accounting Association
Subject
Economics and Econometrics,Finance,Accounting
Reference58 articles.
1. A theory of intraday patterns: Volume and price variability;Admati;Review of Financial Studies,1988
2. An analysis of trade-size clustering and its relation to stealth trading;Alexander;Journal of Financial Economics,2007
3. Asset pricing and the bid-ask spread;Amihud;Journal of Financial Economics,1986
4. Stealth trading in options markets;Anand;Journal of Financial and Quantitative Analysis,2007
5. Pay attention to neglected firms;Arbel;Journal of Portfolio Management,1983
Cited by
123 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献