Shareholdings by financial institutions, information asymmetry and the intertemporal return-earnings relation in Japan

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)119-135
Journal / PublicationAsia-Pacific Financial Markets
Volume8
Issue number2
Publication statusPublished - 2001
Externally publishedYes

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. © 2001 Kluwer Academic Publishers.

Research Area(s)

  • Financial institutions, Information asymmetry, Joint ownership of debt and equity, Return-earnings relation