| Authors |
Lang, Stice-Lawrence, Wong, Wong |
| Year |
2022 |
| Type |
Working Paper |
| Abstract |
We develop an empirical proxy for the differential treatment of local and foreign investors using translation differences in public disclosure as observable indicators that reflect non-public interactions. After confirming the validity of our proxy, we show that differential treatment results in significant information asymmetry between local and foreign investors as measured through stock illiquidity, and analysis of analyst forecast errors suggests that this information asymmetry is created by firms providing foreign market participants with lower quality information. Firms respond to strategic incentives for differential treatment relating to government subsidies and capital raising, and thus differential treatment is not just a byproduct of resource constraints. Our results highlight the role of differential treatment as one driver of local information advantage. |
| Keywords |
Differential treatment, local information advantage, translation differences, financial disclosure, information asymmetry, textual analysis, globalization |
| URL |
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3956105&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags |
Archival Empirical |
Asset Pricing, Trading Volume and Market Efficiency |
Manager / Firm Behavior |
Media and Textual Analysis
|