Institutional Investor, Private Information Transfer and Investment-Price Sensitivity: Evidence from Institutional Investors' Net Buying during the Period of Earnings Announcements

Abstract

Abstract: Based on the daily data of institutional investor's net buying within the earning announcement period from 2012 to 2019, this paper studies whether institutional investors' net buying increase the company's investment-price sensitivity. The result shows that during the period of earnings announcements, institutional investors' net buying significantly increase the company's investment-price sensitivity. The channel analysis indicates that the company's investment is associated with the private information transferring. We also find that the impact of institutional investor's net buying on investment-price sensitivity is more significant when good earning news is announced, and the company is not covered extensively by analysts. Furthermore, this positive correlation is more significant when the company is young, financial constraints are not harsh and market competition is drastic. The research proves the feedback effect of institutional investors' net buying on the real economy.

Key words: institutional investor, net buying, feedback effect, earnings announcement

Zhang Meng, Wei Yunjie, Zhang Yongshen. Institutional Investor, Private Information Transfer and Investment-Price Sensitivity: Evidence from Institutional Investors' Net Buying during the Period of Earnings Announcements[J]. Management Review, 2022, 34(5): 265-280.

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