Abstract
This paper examines the effect of mandatory portfolio disclosure by actively managed investment funds on investee firms’ investment decisions. Mandatory portfolio disclosures can reduce fund managers’ incentive to collect and trade on private information, and thereby reduce the stock price informativeness of their portfolio firms. Using a difference-in-differences design around the May 2004 SEC regulation requiring more frequent disclosure, we find that investment sensitivity to stock prices declines for firms with significant ownership by actively managed funds affected by the regulation. Results from cross-sectional tests indicate that the decline in investment-price sensitivity is concentrated among firms owned by funds with larger expected proprietary costs and for firms more likely to learn from the information in price. We conduct numerous placebo and robustness tests to mitigate endogeneity concerns. Overall, our results suggest that portfolio disclosure requirements have spillover effects on corporate investment by lowering managers’ opportunities to learn from price.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
