Ownership Structure and Trading Volume Reaction to Earnings Announcements: Evidence from Japan

Pacific-Basin Finance Journal, Volume 6, Issues 1–2, May 1998, Pages 45–60

University of Alberta School of Business Research Paper No. 2013-1057

Posted: 2 Jul 2013

See all articles by Dennis Y. Chung

Dennis Y. Chung

Simon Fraser University

Jason Lee

University of Alberta

Date Written: June 1, 1997

Abstract

We investigate the impact of ownership structure on trading volume reaction to earnings announcements using a sample of Japanese companies. Our primary tests focus on differential trading activities carried out by three types of shareholders in response to earnings announcements: corporate stockholders, foreign investors, and ordinary domestic investors. We find that trading volume is negatively associated with the level of interlocking ownership which is designed to provide long-term stable relationships among members of Japanese corporate (keiretsu) groups. Furthermore, foreign investors are more responsive to earnings announcements than their domestic counterparts, and are sophisticated in selecting their investment targets. Our overall findings are consistent with the argument of Lev (1988) that disclosures of accounting information may not necessarily have the same value to various classes of investors.

Keywords: Earnings announcements, Keiretsu, Foreign investors, Trading volume

JEL Classification: F21, G32, M41

Suggested Citation

Chung, Dennis Y. and Lee, Jason, Ownership Structure and Trading Volume Reaction to Earnings Announcements: Evidence from Japan (June 1, 1997). Pacific-Basin Finance Journal, Volume 6, Issues 1–2, May 1998, Pages 45–60, University of Alberta School of Business Research Paper No. 2013-1057, Available at SSRN: https://ssrn.com/abstract=2280829

Dennis Y. Chung (Contact Author)

Simon Fraser University ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Jason Lee

University of Alberta ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-4839 (Phone)
780-492-3325 (Fax)

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