TY  - BOOK
AU  - Leano,Miguel
AU  - Leano,Miguel
AU  - Pedraza,Alvaro
TI  - Informed Trading in Business Groups, Ownership Concentration, and Market Liquidity
PY  - 2016///
CY  - Washington, D.C.
PB  - The World Bank
KW  - Corporate Law
KW  - Finance and Financial Sector Development
KW  - Investment & Investment Climate
KW  - Law and Development
KW  - Macroeconomics and Economic Growth
KW  - Private Sector Development
N2  - Business groups, which are collections of publicly traded companies with significant amount of common ownership, dominate private sector activity in developing countries. This paper studies how information flows within these groups by analyzing the trading behavior of pension fund managers in firms that belong to the same group. The paper shows that while pension fund managers are momentum traders on non-affiliated companies, they trade in anticipation of future abnormal returns in affiliated firms. Ownership concentration and business group ties exacerbate information asymmetries, discouraging investment and depressing stock market participation. Using the merger and acquisition activity among pension fund managers as a natural experiment, the paper provides evidence that increases in stock ownership concentration, via the threat of informed trading, adversely affect liquidity. The results indicate that cross-ownership structures and extensive investor-industry relations might curb the expected benefits from the presence of institutional investors, limiting market development
UR  - http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-7688
ER  -