Ownership Disclosure and Ownership Structure: Investors' Response to Lower Reporting Thresholds

Abstract

I examine the impact of stricter ownership disclosure rules on ownership structure and stock liquidity. The analysis relies on privately reported holdings and a stock market with a disclosure regime in only one segment. Consistent with prior research, I show that mutual funds decrease their holdings when the initial disclosure threshold is lowered. Extending prior research, I further show that non-financial corporations increase their holdings and thus replace mutual funds. This shift in ownership structure weakens the positive relation between disclosure and liquidity, suggesting that mandatory ownership disclosure can be costly not only for disclosing but also for non-disclosing investors.