Leveling the Playing Field: Financial Regulation and Disappearing Local Bias of Institutional Investors

Leveling the Playing Field: Financial Regulation and Disappearing Local Bias of Institutional Investors

This study examines how changes in firms’ information environment affect local agents. We show that local bias and informational advantage of institutional investors and equity analysts located around corporate headquarters decline sharply following the adoption of Regulation Fair Disclosure and Sar...

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Bibliographic Details
Main Authors: BERNILE, Gennaro, Kumar, Alok, Sulaeman, Johan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2014
Subjects:
disclosure regulation
Reg FD
Sarbanes-Oxley
local bias
local performance
institutionalinvestors
equity analysts
Business
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/4525
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5524/viewcontent/levelingtheplayingfield.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:This study examines how changes in firms’ information environment affect local agents. We show that local bias and informational advantage of institutional investors and equity analysts located around corporate headquarters decline sharply following the adoption of Regulation Fair Disclosure and Sarbanes-Oxley Act. The decline in local bias is more salient among firms whose information environment is more opaque before the new rules. At the aggregate market level, the degree of informed trading attributed to local investors also declines. Overall, the evidence is consistent with disclosure regulation affecting the informational advantage that market participants enjoy due to their proximity to firms.

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