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Shareholdings by Financial Institutions, Information Asymmetry and the Intertemporal Return-Earnings Relation in Japan

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Abstract

Using a large sample of Japanese firms, we examine informational effects of the joint ownership of debt and equity by financial institutions. In particular, we argue that shareholdings by financial institutions are associated with increased monitoring and reduced information asymmetry. Our results support the hypothesis that stock prices incorporate information about future earnings earlier for firms with higher equity ownership by financial institutions. In a nutshell, shareholdings by financial institutions appear to be an important institutional factor in Japan to alleviate information asymmetry, thereby serving as a substitute for the market-based monitoring.

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Authors and Affiliations

  1. Department of Accountancy, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

    Sandra W.M. Ho, Li Jiang & Jeong-Bon Kim

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  1. Sandra W.M. Ho
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  2. Li Jiang
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  3. Jeong-Bon Kim
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Ho, S.W., Jiang, L. & Kim, JB. Shareholdings by Financial Institutions, Information Asymmetry and the Intertemporal Return-Earnings Relation in Japan. Asia-Pacific Financial Markets 8, 119–135 (2001). https://doi.org/10.1023/A:1011915519403

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