Contemporary Accounting Research Vol. 40 No. 4 2023

Mutual funds' reporting frequency and firms' responses to undervaluation: The role of share repurchases

Thomas Bourveau¹; Xinlei Li²; Daniele Macciocchi³; Chengzhu Sun⁴

¹ Graduate School of Business, Columbia University New York New York USA · ² University of California, Davis Davis California USA · ³ Miami Herbert Business School University of Miami Coral Gables Florida USA · ⁴ School of Accounting and Finance The Hong Kong Polytechnic University Hung Hom Hong Kong

Abstract

We examine a regulatory change that increased the reporting frequency of mutual funds' portfolios. Using a difference‐in‐differences design, we find that firms with greater ownership by mutual funds increase share repurchases following the regulatory change. We show that these share repurchases are a firm's rational response to undervaluation, which occurs because fund managers become shortsighted following the regulation and sell companies with good long‐term prospects. Collectively, our results shed light on an unintended consequence of more frequent reporting in a delegated asset management framework.

DOI

10.1111/1911-3846.12887

Volume

40

Issue

4

Pages

2616-2642

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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