Information Acquisition Activities Research Articles

Do individual investors pay attention to the information acquisition activities of institutional investors?

This study investigates individual investors' responses to institutional investors' information acquisition activities. We examine the association between institutional investors' site visits and individual investors' posts on the online message board. We find that the total abnormal posts of individual investors significantly increase after institutional investors' site visits. Additional tests show that individual investors will pay more attention when institutional investors visit firms with low profitability, high earnings management, low manager sentiment, and poor environmental, social, and governance (ESG) performance.

특성화 고등학교 학생들의 학년 변화에 따른 진로활동 유형별 인식과 진로성숙도와의 영향관계 분석

Objectives In this study, the relationship between career activity types and career maturity according to the grade change of students from Vocational high schools was analyzed.
 Methods For this purpose, data from the 7th year (2016: 515 persons), 8th year (2017: 479 persons), and 9th year (2018: 462 persons) of the Seoul Education Longitudinal Study 2010 were used. In addition, three career activity types were set as independent variables and career maturity was set as dependent variable. Based on the set independent and dependent variables, descriptive statistics and multiple regression analysis by grade were conducted.
 Results As a result of descriptive statistics, the perception of career activity types and career maturity of students from vocational high schools were maintained at a moderate level. In addition, students from vocational high schools were positively aware of counseling with their parents in the analysis of career activity types, and the level of self-understanding was relatively low compared to other factors in the analysis of career maturity. Next, as a result of multiple regression analysis, the career maturity of students in vocational high schools was influenced by counseling activities and information acquisition activities in the order of the first year of high school, in the order of information acquisition activities and counseling activities during the second year of high school, and in the order of information acquisition activities and counseling activities in the third year of high school. The timing was influenced only by the participation activity.
 Conclusions Based on this, it was suggested to check the contents and qualitative aspects of career activities, the need for parent training, consider ways to strengthen self-understanding, and apply career education stages according to the analysis of influence relationships.

Secret and Overt Information Acquisition in Financial Markets

Abstract We study the observability of investors’ information-acquisition activities in financial markets. Improving observability leads to two strategic effects on information acquisition: (1) the pricing effect, which arises from interactions between investors and the market maker and can encourage or discourage information acquisition, and (2) the competition effect, which concerns interactions among investors and always encourages information acquisition. We apply our theory to study voluntary and mandatory disclosures of corporate site visits. When the competition effect dominates, investors voluntarily disclose their visits. When the pricing effect dominates, mandatory disclosure is effective. Our analysis sheds novel light on Regulation Fair Disclosure. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Acquired Knowledge that Support Entrepreneurs: Implications for Entrepreneurial Emotion and Learning

In the field of entrepreneurial learning, a major focus has been on understanding learning tasks, i.e., the knowledge required for entrepreneurial activity. However, to date, research has solely focused on opportunity information and concrete know-how related to technology and management, and has not analyzed the mindsets and psychological foundations that guide decision-making as learning objects. To fill this gap, we asked what knowledge entrepreneurs gain and conducted a comprehensive and exploratory analysis of archival interviews of 96 Japanese entrepreneurs. As a result, we discovered a fourth category that could not be classified into the previous three categories: opportunity information, capability, and schema. We named it way of being, meaning the personal ideals of being when working on businesses. This finding suggests that entrepreneurs navigate their emotional journey depending on what they learn from their experiences and the teaching of others. This study is novel as it examines the impact of knowledge and information acquisition activities on entrepreneurs’ emotions. We also showed that entrepreneurs can be categorized into three types: strategic, cognitive, and emotional, based on the learning content they focus on.

Foreign investments during financial crises: Institutional investors’ informational skills create value when familiarity does not

During periods of market turmoil, the strategies adopted by institutional investors impact their own financial soundness. Investors’ flight to familiarity during heightened market uncertainty is well documented in the literature. However, the impact of this phenomenon on institutional investors’ performance remains unexplored. In this paper, the performance of US global funds is investigated to assess whether it has been driven by their degree of familiarity with foreign markets or by their selectivity skills during the subprime financial crisis. The paper’s findings suggest that managers’ active stock selection improves fund performance by a significant annualized alpha of 2.24% if this selectivity is based on their informational advantage. In contrast, managers who were seeking familiar stocks to be “on the safe side” during the crisis period did not create value for their clients. These results are valuable for fund managers’ asset allocation strategies during periods of financial turmoil. They are also useful for financial market authorities in their efforts (a) to convince institutional investors towards pursuing their information acquisition activities during crisis periods and (b) to improve investors’ protection in financial markets.

The Geography of Information Acquisition

AbstractUsing detailed data on company visits by Chinese mutual funds, we provide direct evidence of mutual fund information acquisition activities and the consequent informational advantages mutual funds establish in local firms. Mutual funds are more likely to visit local and nearby firms both in and outside of their portfolios, but the ease of travel between fund and firm locations can substantially alleviate geographic distance constraints. Company visits by mutual funds are strongly associated with both fund trading activities and fund trading performance. Our results show that geographic constraints and costly information acquisition amplify information asymmetry in financial markets.

Information acquisition and expected returns: Evidence from EDGAR search traffic

Using a novel dataset containing investors’ access of company filings through the SEC’s EDGAR system, we show that the abnormal number of IPs searching for firms’ financial statements strongly predicts future stock returns and firm fundamentals. A long-short portfolio based on our measure of information acquisition activity generates a monthly abnormal return of 80 basis points that is not reversed in the long-run. Consistent with theories of endogenous information acquisition, the return predictability is more pronounced for firms with larger and lengthier financial filings that are more costly to process, and for IPs searching current and historical filings simultaneously. Our findings suggest investors’ costly information acquisition activities reveal their private expectation of firm value.

Longs, shorts, and the cross-section of stock returns

We study the relation between severe investor disagreement and stock returns based on the observed short-interest and long positions of hedge funds. We show strong disagreements are prevalent among active, sophisticated investors. From 1997 to 2014, 30% of highly shorted stocks have high hedge fund ownership, but these stocks do not earn abnormal returns. Evidence shows that large simultaneous holdings of short sellers and hedge fund managers likely arise from their information-acquisition activities. Although active long or short positions on average predict subsequent stock returns, neither long investors nor short sellers consistently prevail when the two sides disagree.

Commitment to responsible investing and mutual fund performance - Evidence from China

We study the impact of fund-families committing to the United Nations Principles for Responsible Investment on mutual fund performance in China. First, we find consistent evidence that the funds coming from signatory fund-families outperform peers from comparable non-signatory fund-families, and that such an effect is stronger for the ESG funds than for the non-ESG funds. Second, we conjecture that facing the opaque ESG-information environment, signatory fund-families may need to rely on the information collected through private channels to fulfill their commitments. Using a unique dataset of information acquisition activities, we show that signatory fund-families conduct more selective access events than the comparable non-signatories, and that the subsequent increase in the stock holding of the event firms is larger for the signatory funds than for the non-signatory funds. Third, we show that the performance of funds’ positions in the stocks of the event firms exceeds that of the positions in the stocks of the non-event firms in the same industry. The results indicate that the outperformance of signatory funds is associated with higher information acquisition activism of their fund-families that brings information advantages over other market participants. The study draws attention to the issue of promoting information transparency and in particular ESG disclosures.

Information Acquisition Experience, Investor Sophistication, and IPO Price Pressure

We propose a simple measure of investor sophistication based on financial statement experience derived from publicly available EDGAR log data about accounting information acquisition activity. This approach allows us to provide unique empirical evidence for the existence of attention induced price pressure effects in the cross-section of initial public offerings, i.e. that pre-IPO-week attention from likely unsophisticated investors is associated with higher initial returns and subsequent, significant price depreciations. These results are robust to various measures of abnormal post-IPO returns, attention, and sophistication. The proposed direct experience-measurement is easily replicable and potentially useful for many other questions in economics.

Company Visit Disclosure Regulation and Analysts’ Information Acquisition

There is a debate on whether company visits, an important channel of analysts’ information acquisition, should be regulated similar to management disclosure under Regulation Fair Disclosure. Exploiting a Shenzhen Stock Exchange regulation, this study examines the impact of forcing the timely disclosure of analysts’ company visits on analysts’ information acquisition. We find that the regulation creates a chilling effect on analysts’ private information acquisition activities, negatively affecting analysts’ stock coverage, company visits and research report issuance. However, for the analysts who do issue earnings forecasts following the regulation, we find no evidence that the accuracy of such forecasts is lower, consistent with a rational expectation equilibrium.

Localized Information Acquisition

his study identifies previously undocumented geography-related diversity in investors’ information acquisition behavior around days with earnings announcements. IP geo-localization of the server log of the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system shows that, around these days, local (non-local) investors’ information acquisition behavior is largely anticipatory (reactionary) in nature. Specifically, local investors are found to sharply increase their information acquisition activities on days leading up to earnings announcements, triggered by intertemporal changes in a firm’s earnings uncertainty and varying predictably with exogenous firm relocation. Their non-local counterparts, on the other hand, generally hold off until the day of the earnings announcement, when new filings information becomes available. Greater pre-announcement information acquisition diversity is predicted to elicit stronger stock price reactions on earnings announcement days. Consistent with this prediction, we find that the earnings announcement-day premium is higher when pre-announcement information acquisition by local investors is higher, controlling for time-variant and -invariant firm characteristics.

기관투자가와 기업혁신

We try to provide evidence on whether institutional investors induce managers to participate in firm innovation or to make myopic corporate policies by exploring the relationship between institutional ownership and firm innovation. Using manufacturing firms listed on two Korean stock markets from 2005 and 2017, we find positive relationships between institutional ownership and two innovation variables measured by the number of patent applications and the one minus the technological proximity. These relationships are robust even if we consider the fact that our two innovation measures have the nontrivial portions of firms with zeros by estimating Tobit regressions and the number of patent applications has the nature of non-negative and count variable by using Poisson and negative binomial regressions. We also document robust results from eliminating the differences between characteristics of firms with versus without institutional ownership by a propensity score matching, and from controlling for a reverse causality between institutional ownership and innovation variables by two-stage regressions using an instrumental variable. These findings indicate that institutional investors encourage managers in Korean listed firms to participate in firm innovation with long-term nature and high probability of failure through their monitoring and information acquisition activities.

Institutional Investors’ Corporate Site Visits and Firms’ Sustainable Development

Institutional investors are essential stakeholders of the firm, and they care about firms’ sustainable development. In this study, we focused on a prevalent and essential type of information acquisition activity of institutional investors: corporate site visits, which refers to their trip to the firms’ headquarters and factories. We investigated the impact of institutional investors’ corporate site visits on firms’ likelihood of environmental violation. Using Chinese listed manufacturing firms in the Shenzhen Stock Exchange from 2009 to 2017, the econometric analysis shows that institutional investors’ corporate site visits significantly decrease firms’ likelihood of environmental violation. Moreover, this effect is more pronounced for firms in heavily polluting industries, firms not owned by the government, and firms with less institutional shareholding. Furthermore, we show that institutional investors’ corporate site visits prevent environmental violations by increasing firms’ environmental investment. Our study highlights the importance of institutional investors’ corporate site visits by showing that they are beneficial to the firms visited.

Tick Size and Financial Reporting Quality in Small‐Cap Firms: Evidence from a Natural Experiment

ABSTRACTUsing a natural experiment (the SEC's 2016 Tick Size Pilot Program), we investigate the effects of an increase in tick size on financial reporting quality. The tick size pilot program reduces algorithmic trading (AT) and increases fundamental investors’ information acquisition and trading activities. This in turn increases the scrutiny of managers’ financial reporting choices and reduces their incentives to engage in misreporting. Using a difference‐in‐differences research design, we find a significant decrease in the magnitude of discretionary accruals, a significant reduction in the likelihood of just meeting or beating analysts’ forecasts, and a marginally significant decrease in restatements for the treated firms in the pilot program. Furthermore, we find that the change in financial reporting quality is concentrated in treated firms experiencing decreases in AT and increases in information acquisition activities. We also find that the mispricing of accruals is significantly lower for treated firms. Taken together, our results suggest that an increase in tick size has a causal effect on firms’ financial reporting quality.

Tick Size and Financial Reporting Quality in Small-Cap Firms: Evidence from a Natural Experiment

Using a natural experiment (the SEC’s 2016 Tick Size Pilot Program), we investigate the effects of an increase in tick size on financial reporting quality. The tick size pilot program reduces algorithmic trading and increases fundamental investors’ information acquisition and trading activities. This in turn increases the scrutiny of managers’ financial reporting choices and reduces their incentives to engage in misreporting. Using a difference-in-differences research design, we find a significant decrease in the magnitude of discretionary accruals, a significant reduction in the likelihood of just meeting or beating analysts’ forecasts, and a marginally significant decrease in restatements for the treated firms in the pilot program. Furthermore, we find that the change in financial reporting quality is concentrated in treated firms experiencing decreases in algorithmic trading and increases in information acquisition activities. We also find that the mispricing of accruals is significantly lower for treated firms. Taken together, our results suggest that an increase in tick size has a causal effect on firms’ financial reporting quality.

Information encountering re-encountered

PurposeIn order to understand the totality, diversity and richness of human information behavior, increasing research attention has been paid to examining serendipity in the context of information acquisition. However, several issues have arisen as this research subfield has tried to find its feet; we have used different, inconsistent terminology to define this phenomenon (e.g. information encountering, accidental information discovery, incidental information acquisition), the scope of the phenomenon has not been clearly defined and its nature was not fully understood or fleshed-out.Design/methodology/approachIn this paper, information encountering (IE) was proposed as the preferred term for serendipity in the context of information acquisition.FindingsA reconceptualized definition and scope of IE was presented, a temporal model of IE and a refined model of IE that integrates the IE process with contextual factors and extends previous models of IE to include additional information acquisition activities pre- and postencounter.Originality/valueBy providing a more precise definition, clearer scope and richer theoretical description of the nature of IE, there was hope to make the phenomenon of serendipity in the context of information acquisition more accessible, encouraging future research consistency and thereby promoting deeper, more unified theoretical development.

Can individual investors identify economic links? Evidence from initial quarterly earnings announcements within industries

ABSTRACT We examine whether individual investors in China have the ability to acquire and process the information of industry peers. We exploit the initial earnings announcement within each industry-quarter during 2015-2017 and use the frequency of investors’ daily discussions on the Xue Qiu platform to capture their information acquisition activities. We find that non-announcing firms’ investors exhibit a significant increase in their discussion frequency around the initial earnings announcement within an industry. These increased discussions facilitate the information transfer from the announcing firm to its non-announcing peers, manifested by the latter’s reactions in share prices and trading volume to the former’s unexpected earnings. In the cross-section, investors’ acquisition and processing of peer information are more pronounced when non-announcing firms exhibit a worse information environment or a stronger economic link with the announcing firm. Collectively, individual investors in China exhibit some rationality in acquiring and utilizing information of economically linked firms.

The Rationally Inattentive Manager

We analyze the ordering decisions of a manager who acquires demand information to make inventory decisions. Human beings' cognitive ability in information acquisition is imperfect by nature. We adopt the rational inattention theory to model the information acquisition activity. By reformulating the rational inattention decision problem, we find that rational inattention theory resembles the free energy principle (Friston 2009, 2010) that is used to model brain activities. Therefore, rational inattention theory gets a neurocognitive foundation. We obtain closed-form solutions of the optimal action strategies, which is a discrete distribution although the states are continuous. The process of resulting the optimal action strategies shows that the essence of the process, as a neurocognitive activity, is to think until nothing to think. The optimal action strategies themselves show that an effective thinking is hard to obtain unless think one more step. We also study the impact on decisions once the primitive information is contaminated. If the primitive information is contaminated by, for example, data sampling errors, the acquired information will be eclipsed by the contamination and exhibit certain features that mistaken the ordering decisions by acquiring information if the primitive information were clean. The specific forms of the well-known one-to-one correspondence between action and signal are also restricted by the contamination. We propose an empirical approach to identify the optimal ordering quantities, and the approach works only if the information contamination is separated from the estimation of the unconditional optimal ordering strategies.

Is There Information Content in Information Acquisition?

ABSTRACTIn this study, we examine whether investors' actions to acquire accounting information are predictive of future firm performance because these actions partially reveal investors' private expectations of this performance. Using a database of EDGAR downloads, we find some evidence that information acquisition of accounting reports by EDGAR users is, on average, predictive of future firm performance. We then determine the identity of the EDGAR user and examine whether different users' private expectations will be relatively more predictive of subsequent performance. We find that the information acquisition activities of more sophisticated institutional users (e.g., hedge funds, investment banks) are more strongly associated with future performance than are those of less sophisticated retail users. Finally, we find that information acquisition by sophisticated institutions is a leading indicator of their equity holdings. In summary, this study provides evidence of predictive information embedded in sophisticated investors' actions to acquire accounting information.