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Family control, multiple institutional block-holders, and informed trading

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  • Xiaoxiang Zhang
  • Jenifer Piesse
  • Igor Filatotchev

Abstract

This paper investigates how large family shareholders and institutional block-holders jointly influence informed trading and firm valuation in the Hong Kong stock market. It combines market microstructure research with studies on the governance roles of multiple block-holders and finds that institutional block-holders rely on their relative controlling power vis-à-vis family owners to mitigate problems associated with informed trading. They also use their ownership rights to improve the structure of informed trading. However, these governance roles are predominantly exercised by pressure-resistant institutional block-holders. Informed trading reduces firm valuation, while an improvement in its structure increases valuation. Therefore, the governance roles of controlling families and pressure-resistant institutional block-holders may have different implications in terms of investors' perceptions of private information risk.

Suggested Citation

  • Xiaoxiang Zhang & Jenifer Piesse & Igor Filatotchev, 2015. "Family control, multiple institutional block-holders, and informed trading," The European Journal of Finance, Taylor & Francis Journals, vol. 21(10-11), pages 826-847, August.
    • Handle: RePEc:taf:eurjfi:v:21:y:2015:i:10-11:p:826-847
    DOI: 10.1080/1351847X.2012.696549
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    Citations

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    Cited by:

    1. Zhang, Qiyu & Zhang, Xiaoxiang & Chen, Ding & Strange, Roger, 2022. "Market discipline or rent extraction: Impacts of share trading by foreign institutional investors in different corporate governance and investor protection environments," International Review of Financial Analysis, Elsevier, vol. 79(C).
    2. Igor Filatotchev & R. Duane Ireland & Günter K. Stahl, 2022. "Contextualizing Management Research: An Open Systems Perspective," Journal of Management Studies, Wiley Blackwell, vol. 59(4), pages 1036-1056, June.
    3. Panicker, Vidya Sukumara & Upadhyayula, Rajesh Srinivas & Sivakumar, Sandeep, 2022. "Internationalization of hybrid state-owned enterprises from emerging markets: Institutional investors as enablers," Journal of Business Research, Elsevier, vol. 151(C), pages 409-422.
    4. Nicholas Addai Boamah, 2021. "Integration, investor protection rules and global informational inefficiency of emerging financial markets," SN Business & Economics, Springer, vol. 1(6), pages 1-22, June.
    5. Zhang, Xiaoxiang & Zhang, Qiyu & Chen, Ding & Gu, Jun, 2019. "Financial integration, investor protection and imbalanced optimistically biased information timeliness in emerging markets," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 38-56.
    6. Hanqing “Chevy” Fang & Kulraj Singh & Taewoo Kim & Laura Marler & James J. Chrisman, 2022. "Family business research in Asia: review and future directions," Asia Pacific Journal of Management, Springer, vol. 39(4), pages 1215-1256, December.

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