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Abstract
ABSTRACT This article aims to verify what the influence is of different disclosure activities on the concentration of more sophisticated investors in Brazilian companies. The study fills a gap regarding the influence that disclosure activities can have on the concentration of sophisticated investors in Brazilian firms, considering that this may occur due to their ability to maximize the usefulness of the information disclosed and the return on investments, with a reduction in the cost of allocated funds. This subject is relevant because it verifies not the clientless effect of disclosure, presented by the only study previously developed on the subject in the United States (Kalay, 2015), but rather the influence that disclosure activities (earnings forecasts, market communications, and investor relations [IR]) have on the most sophisticated investors’ decisions to allocate funds in companies in the Brazilian market. As an impact on the area, it was noted that those companies that release market communications attract the investment of funds and the concentration of sophisticated investors much more than those that present better IR and release profit forecasts. We studied 89 publicly-traded companies whose reference forms were published in the period from 2011 to 2016. The number of institutional investors disclosed in the reference forms was used as a proxy to categorize them as more sophisticated. The different disclosure activities were represented by the disclosure of profit forecasts, the number of market communications, and the best IR. The best IR proxy was categorized using the companies awarded by IR Magazine Brazil that presented the best IR in the study period. The results of this study show that the most sophisticated investors concentrated in companies with better IR, in those that do not disclose profit forecasts, and in companies with a greater number of disclosed market communications. The disclosure of market communications is the disclosure activity that most influences the concentration of sophisticated investors in Brazilian companies that use more voluntary disclosure than discretionary disclosure to allocate their funds.
Highlights
Investor sophistication can be understood using different focuses
The descriptive statistics analysis involved central and dispersion tendency measures of the variables corresponding to investor sophistication and to the disclosure activities (Table 3)
The aim of the study was to verify what the influence is of different disclosure activities over the concentration of more sophisticated investors in Brazilian companies, with the assumption being that there was a relationship between these two paradigms and the theoretical approach of investment decisions to maximize earnings and reduce the cost of capital
Summary
Investor sophistication can be understood using different focuses. Under the usefulness of information focus, Easley and O’Hara (2010) relate the sophistication of investors with their capacity to maximize the usefulness of the information relating to their investments. When market trading is emphasized, Koehler (2014) indicates that sophisticated investors are able to judge the risk of information, independently of the activity through which it was disclosed
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