Differential informativeness of analyst reports by investor types

Kyung Soon Kim (Division of Business Administration, Chosun University, Gwangju, Republic of Korea)
Jinwoo Park (Hankuk University of Foreign Studies, Seoul, Republic of Korea)
Yun W. Park (Faculty of Business and Economics, Chung-Ang University, Seoul, Republic of Korea)

Managerial Finance

ISSN: 0307-4358

Publication date: 8 May 2017

Abstract

Purpose

The purpose of this paper is to investigate whether there is any difference across individual investors, domestic and foreign institutional investors in trading volume responses to analyst reports. The authors also examine the determinants of trading volume responses using firm as well as forecast characteristics.

Design/methodology/approach

The authors use trading data from the Korean equity market. The authors divide investors into three classes of investors; namely, individual investors, domestic institutional investors, and foreign institutional investors. The authors then examine whether the trading responses to analyst reports vary across investor types, and how firm characteristics and characteristics of analyst reports influence the trading activities on the release dates across investor types.

Findings

Individual investors are the most responsive investor group, being responsive to analyst reports on small, neglected firms with large inside ownership as well as to analyst reports with optimistic forecasts. Domestic institutional investors are responsive to reports on neglected firms with high return volatility while foreign institutional investors show least responses.

Originality/value

There are few studies that investigate whether the trading responses to analyst reports vary across investor types and how firm characteristics and characteristics of analyst reports influence the trading activities on the release dates across investor types. Taking advantage of the trading volume data for the three main investor types in the Korean stock market, the authors study the trading volume responses for each investor type and make comparisons across investor types.

Keywords

Acknowledgements

This research was supported by research funds of Chosun University, Hankuk University of Foreign Studies, and Chung-Ang University.

Citation

Kim, K., Park, J. and Park, Y. (2017), "Differential informativeness of analyst reports by investor types", Managerial Finance, Vol. 43 No. 5, pp. 567-594. https://doi.org/10.1108/MF-06-2016-0166

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Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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