Title

Shareholder Coordination and Stock Price Informativeness

Document Type

Article

Language

eng

Publication Date

5-2018

Publisher

Wiley

Source Publication

Journal of Business Finance & Accounting

Source ISSN

0306-686X

Abstract

We show that firm‐specific information is more likely to be incorporated into stock prices when firms have stronger shareholder coordination. The premise of our work is that geographic proximity reduces communication costs among shareholders, thereby leading to better coordination. The positive coordination‐informativeness relation is driven mainly by shareholder coordination among dedicated and independent institutions. We further show that the positive effect is more pronounced for firms with weaker governance mechanisms, suggesting that shareholder coordination could serve as a substitute conduit of price discovery. Lastly, we propose that shareholder coordination improves stock price informativeness through the channel of enhanced voluntary disclosure quality.

Comments

Journal of Business Finance & Accounting, Vol. 45, No. 5/6 (May/June 2018): 686-713. DOI.

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