Institutional ownership, peer pressure and voluntary disclosures
Document Type
Journal article
Source Publication
The Accounting Review
Publication Date
10-23-2017
Volume
Advance online publication
Publisher
American Accounting Association
Abstract
We document peer effect as an important factor in determining corporate voluntary disclosure policies. Our identification strategy relies on a discontinuity in the distribution of institutional ownership caused by the annual Russell 1000/2000 index reconstitution. Around the threshold of the Russell 1000/2000 index, the top Russell 2000 index firms experience a significant jump in institutional ownership compared with their closely-neighbored bottom Russell 1000 index firms due to index funds' benchmarking strategies. The increase in institutional ownership and resultant improvement in the information environment of the top Russell 2000 index firms create pressures on their industry peers to increase voluntary disclosures. Consistent with this prediction, we find that the discontinuously higher institutional ownership of the top Russell 2000 index firms significantly increases industry peers' likelihood and frequency of issuing management forecasts. Further analyses show that such an effect could be driven by firms' incentive to compete for capital.
DOI
10.2308/accr-51945
Print ISSN
00014826
E-ISSN
15587967
Publisher Statement
Copyright © 2017 American Accounting Association. All rights reserved. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Lin, Y., Mao, Y., & Wang, Z. (2017). Institutional ownership, peer pressure and voluntary disclosures. The Accounting Review. Advance online publication. doi: 10.2308/accr-51945