FINTECH THRUST SEMINAR | Institutional Ownership Concentration and Informational Efficiency
Institutional Ownership Concentration and Informational Efficiency
Abstract:
We study how the concentration of ownership among active institutional investors influences the informational efficiency in the financial market, in terms of forecasting price efficiency (FPE) and revelatory price efficiency (RPE). We find that an increase in ownership concentration, whether at the market level or the firm level, has a negative impact on both FPE and RPE. When ownership becomes more concentrated, active investors reallocate their attention across different assets and trade more cautiously, resulting in a reduced injection of information into asset prices and a subsequent decrease in the investment efficiency. To establish causality, we utilize a setting involving mergers between active investors, and our results remain consistent across international contexts.
Yan Xiong is an associate professor at University of Hong Kong. She received her PhD from the University of Toronto. Her research focuses on financial markets, corporate finance, and information economics. Her work has been published in top journals such as Review of Financial Studies, Journal of Financial Economics, Journal of Accounting Economics, Journal of Economic Theory, Journal of Accounting Research, etc.