In this study, we investigate the trading behavior of institutional investors in China according to management earnings forecasts (MEFs) and earnings announcements (EAs). MEFs are mandatory under the stringent regulatory framework in China. We find evidence that both MEFs and EAs have an effect on the market. However, MEFs have a bigger effect on the market than do EAs. According to a sample of semiannual observations of firms from 2003 to 2008, we find that changes in the stock ownership of institutions are positively associated with EAs but not significantly associated with MEFs. When we further examine the relations between institutional characteristics and trading strategies, we find that growth funds exploit the arbitrage opportunity of MEFs.
Scopus Subject Areas
- Economics, Econometrics and Finance(all)
- Earnings announcement
- Institutional trading
- Management earnings forecasts