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theses

This dissertation includes two essays. The first essay examines how changes in ownership breadth affect the profitability of 21 anomaly-based strategies. I find that the profitability of these strategies is weaker following a growth in ownership breadth in the prior quarter. The return pattern is primarily attributed to the insignificant returns in the short portfolios. In addition, reduction in short-sale constraints due to increase in the ownership breadth can explain the insignificant return in the short portfolio. The conclusions stay the same after controlling for the common risk factors including the Fama-French three factors and the momentum factor. My results are robust to different size groups, different portfolio weighting methods, an alternative measure of active institutional investors and cross-sectional regression tests. These findings indicate that active institutional investors improve market efficiency. In the second essay, I examine how the relaxation of short-sale constraints affects the readability in financial disclosures using a natural experiment. From 2005 to 2007, the SEC implemented a pilot program in which one-third of the Russell 3000 stocks were randomly selected as pilot stocks and were exempted from short-sale price tests. I find that the readability of 10-K reports for the pilot stocks significantly decreases during the program period. Moreover, the relation between a reduction in short-sales constraint and annual report readability is not uniform in the cross-section. I find that the results are more pronounced for firms that are smaller, less profitable or riskier; for firms that have lower institutional ownership or analyst coverage; and for firms with worse corporate governance or corporate social responsibility. I conclude that Regulation SHO leads to lower readability in the context of financial disclosures.

ETD_7651

Ph.D.

Includes bibliographical references

by Weike Xu

doi:10.7282/T3K35X0G

ETD doctoral

The author owns the copyright to this work.