TY - JOUR
T1 - Governance through trading
T2 - Institutional swing trades and subsequent firm performance
AU - Gallagher, David R.
AU - Gardner, Peter A.
AU - Swan, Peter L.
PY - 2013/4
Y1 - 2013/4
N2 - Abstract Using unique daily fund-manager trade data, we examine the role of institutional trading in influencing firm performance. We show that short-horizon informed trading by multiple institutional investors effectively disciplines corporate management. Our focus is on short-term swing trades, sequences with three phases (e.g., buy-sell-buy). We find swing trades increase stock price informativeness, are profitable after costs, and improve market efficiency. This increase in stock price informativeness is associated with subsequent firm outperformance. Trades are most beneficial with optimal stock holdings that reflect the information acquisition incentives of investors as well as liquidity costs.
AB - Abstract Using unique daily fund-manager trade data, we examine the role of institutional trading in influencing firm performance. We show that short-horizon informed trading by multiple institutional investors effectively disciplines corporate management. Our focus is on short-term swing trades, sequences with three phases (e.g., buy-sell-buy). We find swing trades increase stock price informativeness, are profitable after costs, and improve market efficiency. This increase in stock price informativeness is associated with subsequent firm outperformance. Trades are most beneficial with optimal stock holdings that reflect the information acquisition incentives of investors as well as liquidity costs.
UR - http://www.scopus.com/inward/record.url?scp=84880988543&partnerID=8YFLogxK
U2 - 10.1017/S0022109013000203
DO - 10.1017/S0022109013000203
M3 - Article
AN - SCOPUS:84880988543
SN - 0022-1090
VL - 48
SP - 427
EP - 458
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 2
ER -