Precision of Investor Information and Financial Disclosure

Woan-lih Liang*, Hsiou Wei W. Lin, Yir Jung Syu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

This study investigates a situation in which the precision of an inside investor's private signal increases with the size of his shareholding. Intuitively, an insider with a more informative signal regarding the prospects of a project may be expected to involve himself in larger information-motivated transactions and enjoy greater profits. We suggest that such an advantage, nevertheless, may be alleviated or even eliminated when the financial statements accompanied by disclosure of either his shareholdings or the distribution of block shareholdings reveal the extent to which the insider is informed. The market may optimize its reaction to the order flows accordingly.

Original languageEnglish
Pages (from-to)627-632
Number of pages6
JournalInternational Review of Economics and Finance
Volume19
Issue number4
DOIs
StatePublished - 1 Oct 2010

Keywords

  • Financial disclosure
  • Information precision
  • Insider trading
  • Noisy rational expectation

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