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Institutional Investor Information Competition and Accounting Information Transparency: Implications for Financial Markets and Corporate Governance in China

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Abstract

This paper investigates the interrelationship between institutional investors’ information competition, accounting information transparency, and corporate governance in the context of Chinese A-share listed companies from 2008 to 2020. Institutional investors are considered informed traders due to their access to valuable information and professional research teams. They play a critical role in reducing information asymmetry between listed companies and investors, influencing investment decisions. Previous research has primarily focused on the impact of institutional investors’ shareholding on accounting information transparency, but less attention has been paid to the influence of their information competition. This study addresses this gap by examining the competition among institutional investors to acquire exclusive information and the effect on the transparency of corporate accounting information. The study finds that when information competition is low, institutional investors with larger shareholdings tend to decrease the transparency of financial information to gain a private information advantage. Additionally, the paper explores the mediating factors that influence the quality of management disclosure, which is affected by institutional investors. The research contributes to the understanding of institutional investors’ information competition, accounting information transparency, and corporate governance. It reveals that agency cost is a critical linkage factor for institutional investors to influence accounting information transparency to obtain an information competition advantage. It also highlights the impact of stock liquidity and non-Big Four independent audits on the degree of information asymmetry resulting from information competition. Furthermore, the paper suggests that the competitive rivalry between institutional investors determines their tendency to disrupt the market information environment and increase information asymmetry to gain private information advantages. This behavior contradicts the concept of developing institutional investors to foster a healthy and orderly capital market in China. The paper emphasizes the need for regulators to guide and regulate the market behavior of institutional investors.

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Data Availability

The datasets used and/or analyzed during the current study are available from the corresponding author on reasonable request.

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  1. Jifan Hu, Yeyao Tang and Na Yin are contributed equally to this work, they are both first authors.

Authors and Affiliations

  1. Business School, University of New South Wales, Sydney, 2031, Australia

    Jifan Hu

  2. School of Digital Economics, Trade and Management, Chengdu Textile College, Chengdu, 611731, China

    Yeyao Tang & Na Yin

  3. School of Management, Sichuan University of Science & Engineering, Zigong, 643000, China

    Xiang Guo

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  1. Jifan Hu
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  2. Yeyao Tang
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Correspondence to Xiang Guo.

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Hu, J., Tang, Y., Yin, N. et al. Institutional Investor Information Competition and Accounting Information Transparency: Implications for Financial Markets and Corporate Governance in China. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01482-8

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