Earticle

We exploit Japanese mutual fund flows to demonstrate a strong investor demand for dividends in low-interest-rate environments. According to recent studies, investors who seek current income are more likely to invest in dividend-paying assets in such circumstances. These investors often shift their investments from bank deposits to dividend-paying assets, which offer more attractive cash flows despite higher risk. Investors’ such behavior, commonly referred to as "reaching-for-income," has been examined in various studies. Beyond the previous finding that dividend yields drive this "reaching-for-income" behavior, we show that the frequency of dividend payouts also plays an important role in this behavior. Even after controlling for dividend yields and other crucial factors that impact mutual fund flows, funds that pay dividends on a monthly basis receive more significant inflows than funds that pay out dividends less frequently, particularly during periods of economic expansion. Our findings suggest that, in the presence of incomechasing investors, the amounts and frequency of dividends have implications for asset prices.

This study investigates the impact of a mobile information environment on information asymmetry and investor sentiment among individual investors. To this end, we use a mobile stock trading ratio as a proxy for exposure in the mobile information environment and the Amihud (2002) daily illiquidity ratio, volatility, and difference in net buying dollar volume between individual and institutional investors to measure the degree of information asymmetry. This study also creates an investor sentiment index using the adjusted turnover rate, individual investors’ buy–sell imbalance, and a relative strength index. We find that the mobile information environment significantly decreases individual information asymmetry and investor sentiment. Moreover, the effect in the KOSDAQ market, with high individual investor participation, is more significant than in the KOSPI. The results imply that individual investors may become gradually informed through information processing and cool down the over–heated investor sentiment in the mobile information environment.

This study utilizes new data across countries on bank supervision for the years 1999–2016 to examine the impact of supervisory power and institutional characteristics of supervision on the key stability measures of the banking sector. Our results reveal that the degree of supervisory power and changes in financial supervisory architecture following the global financial crisis tend to enhance the banking sector stability. This study also finds that central banks’ monopolistic involvement in banking supervision appears to strengthen the banking sector stability and the independence of supervisory authority. However, this effect of monopolistic status of central banks in banking supervision countervails the positive effect of the degree of supervisory power and changes in financial supervisory architecture on the soundness of banking sector. These findings shed light on the significance of bank supervisory power and institutional architecture in ensuring the banking sector stability.

본 연구는 기업의 환경, 사회 및 기업 지배구조(Environmental, Social, and Governance; 이하 ESG) 성과가 내부자 거래와 정보비대칭 사이의 관계에 미치는 영향을 분석한다. 2011년부터 2020년까지 한국 유가증권시장과 코스닥시장에 상장된 기업을 대상으로 분석한 결과, 내부자 주식거래와 재무분석가의 이익 예측 오차 및 분산 간의 음(-)의 관계는 ESG 성과가 높은 기업에서 강화되는 것으로 관찰되었다. 이러한 결과는 높은 ESG 성과를 보이는 기업에서 내부자 거래가 제공하는 정보의 투명성과 신뢰성이 향상되어 정보비대칭을 더 많이 감소할 수 있음을 제시한다. 기존 연구와 달리 본 연구는 내부자 거래와 정보비대칭 사이의 관계가 내부자 거래 정보의 질적 측면에 따라 상이할 수 있음을 보였다는 점에서 의의를 갖는다.

There has been an ongoing debate on the impact of insidertrading on financial markets. Insiders can easily access inside information and make abnormal profits through this information advantage, consequently decreasing the confidence of investors in financial markets. In contrast to this negative side, insider trading can positively affect financial markets. Since insider trading provides investors with crucial information that is not publicly released about firms’performance or financial policies, insider trading reduces information asymmetry between firms and investors (Ke, Huddart, and Petroni, 2003; Lustgarten and Mande, 1998; Sivakumar and Vijayakumar, 2001; Kim and Choi, 2010; Sohn, Kim, and Goh, 2009). Insider buying (selling) signals that firms are possibly undervalued (overvalued) or may have good (bad) news, suggesting that insider trading benefits financial markets by decreasing information asymmetry. However, this negative relationship between insider trading and information asymmetry is likely to depend on information quality. Because insider trading in firms that disclose transparent information conveys valuable information to financial markets, the positive effect of insider trading on information asymmetry is expected to increase in these firms. In this reasoning, the relationship between insider trading and information asymmetry is likely to depend on the quality of information that firms provide. Meanwhile, a firm’s environmental, social, and governance (ESG) has received a growing attention from both practitioners and academics over the past decade. ESG is regarded as an important factor for firms to improve a good reputation and achieve sustainable survival (Leem, Cheung, and Son, 2019). Existing studies has examined the relationship between ESG and information asymmetry (Cho, Lee, and Pfeiffer, 2013; Kim, Park, and Wier, 2012; Yoon and Lee, 2019). These studies find that information asymmetry between firms and investors tends to decrease in firms with greater EGS because these firms provide markets with trustworthy information, implying that ESG is likely to improve the quality of information that firms disclose. In line with this extant literature, information quality can affect the relationship between insider trading and information asymmetry, but relatively little is known about this research. Thus, we examine how a firm’s ESG affects the relationship between insider trading and information asymmetry. Since the information quality of firms with more ESG is higher than that of firms with less ESG, the positive effect of insider trading on information asymmetry will be pronounced in firms that invest in more ESG. Based on this discussion, we propose the hypothesis that the negative association between insider trading and information asymmetry strengthens in firms with greater ESG. To test our hypothesis, we use data on Korean firms over the 2011-2020 period. Following existing literature (e.g., Lang and Lundholm, 1996; Krishnaswami and Subramaniam, 1999; Drobetz, Grüninger, and Hirschvogl, 2010), we measure information asymmetry using analysts’forecast errors and dispersion. In addition, we measure insider trading as net insider trading, which is the difference between insider buying and selling in a given year. Furthermore, given that our ESG data comprises six ratings, we define firms with A+, A, or B+ of ESG rating as high ESG firms and these with B, C, or D of ESG rating as low ESG firms, respectively. Our final sample includes 3,531 firm-year observations from 2011 to 2020. We find that the negative relationship between insider trading and analysts’ earnings forecast errors and dispersion is stronger in firms that engage in more ESG. Our results suggest that firms’ ESG is likely to improve the transparency and credibility of insider trading’s information, resulting in a greater decrease in information asymmetry. Further, our findings persist after addressing endogeneity issues such as reverse causality and omitted variable bias concerns. Specifically, our results hold when we conduct various robustness tests including regressions with firm fixed effects, change regressions, and System Generalized Method of Moments (GMM) estimations, and alternative measures of analyst forecasts. While previous studies on insider trading have examined a negative relationship between insider trading and information asymmetry, this paper contributes to the corporate finance literature by showing that the association between insider trading and information asymmetry depends on the information quality of insider trading. Moreover, this study adds to the literature on ESG by focusing on how a firm’s ESG affects information asymmetry.