Publication Type

Journal Article

Version

publishedVersion

Publication Date

8-2025

Abstract

We argue that cross-ownership increases the amount of private information in stock price, enhancing the ability of stock price to provide feedback to managers. Consistent with this argument, we find greater cross-ownership heightens a firm’s investment-q sensitivity. This effect is stronger for firms with a lower propensity for voluntary disclosure and for firms whose managers hold less private information. Furthermore, we find that cross-ownership is negatively associated with the sensitivity of a firm’s investment to its peers’ stock prices. Additionally, cross-ownership has a stronger impact on the investment-q sensitivity when measured among investors who trade more actively the firm’s shares. By using financial institution mergers as an identification strategy, we strengthen the causal inference. Overall, our results suggest that cross-ownership helps increase revelatory price efficiency (RPE), potentially leading to more efficient corporate decisions.

Keywords

cross-ownership, feedback effect of prices, institutional investors, managerial learning

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Financial and Quantitative Analysis

First Page

1

Last Page

33

ISSN

0022-1090

Identifier

10.1017/S0022109025101646

Publisher

Cambridge University Press

Copyright Owner and License

Authors-CC-BY

Additional URL

https://doi.org/10.1017/S0022109025101646

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