Institutional investors' limited attention and stock price informativeness in emerging markets: Evidence from China11We thank participants in 2021 China International Finance Conference (Shanghai) and the Finance and Development Forum (Tsinghua University) for helpful comments on an earlier version of the paper. Ni acknowledges financial support from the National Natural Science Foundation of China (No. 72272126), the Fundamental Scientific Center for Econometric Modeling and Economic Policy Stu

Institutional shareholders, who are also subject to limited attention like individual investors, tend to be distracted by extreme return shocks to unrelated industries. This paper documents that institutional investor distraction significantly impairs the price efficiency of the Chinese financial ma...

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Bibliographic Details
Published inPacific-Basin finance journal Vol. 84
Main Authors Ni, Xiaoran, Jin, Qi
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.04.2024
Subjects
Informed trading
Institutional investors
Limited attention
Price efficiency
Stock price informativeness
Stock price informativeness
Price efficiency
G41
G23
G14
Informed trading
Institutional investors
Limited attention
Online AccessGet full text
ISSN0927-538X
1879-0585
DOI10.1016/j.pacfin.2024.102285

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Summary:Institutional shareholders, who are also subject to limited attention like individual investors, tend to be distracted by extreme return shocks to unrelated industries. This paper documents that institutional investor distraction significantly impairs the price efficiency of the Chinese financial market by reducing stock price informativeness. Further analysis indicates that institutional investor distraction directly decreases the frequency of corporate visits, the activeness of trading, and the reliance on disclosed information. Overall, our study not only provides empirical evidence for the effects of institutional investors' limited attention in emerging markets such as China but also sheds additional light on the importance of financial market institutionalization to the promotion of price efficiency. •Institutional shareholders are subject to limited attention like individual investors.•Institutional investor distraction reduces stock price informativeness in China.•The effect tends to be driven by decreased frequency of corporate visits and less active trading.
ISSN:0927-538X
1879-0585
DOI:10.1016/j.pacfin.2024.102285