The Library
The role of accounting quality during mutual fund fire sales
Tools
Mercado, Facundo, Rubio, Silvina and Scapin, Mariano (2023) The role of accounting quality during mutual fund fire sales. European Accounting Review . doi:10.1080/09638180.2023.2241884 ISSN 0963-8180. (In Press)
|
PDF
WRAP-Role-accounting-quality-mutual-fund-fire-sales-2023.pdf - Published Version - Requires a PDF viewer. Available under License Creative Commons Attribution 4.0. Download (639Kb) | Preview |
|
PDF
WRAP-Role-accounting-quality-mutual-fund-fire-sales-23.pdf - Accepted Version Embargoed item. Restricted access to Repository staff only - Requires a PDF viewer. Download (585Kb) |
Official URL: https://doi.org/10.1080/09638180.2023.2241884
Abstract
We study the ex ante role of accounting quality in mitigating the undervaluation generated by mutual fund fire sales. Asymmetric information between distressed mutual funds and the potential buyers of the securities being fire sold leads to an adverse selection problem resulting in an equilibrium in which buyers trade only at prices below the intrinsic value. Sellers accept these lower prices only because they have severe liquidity needs. To the extent that accounting quality helps market participants better estimate the intrinsic value of the securities being fire sold, we expect the adverse selection problem to be less severe for firms with better accounting quality. Consistently, we find that high accounting quality is associated with smaller fire-sale discounts. This result is explained by two complementary mechanisms. Analysts are more likely to provide price-correcting recommendations, and arbitrageurs trade more heavily on high-accounting-quality firms during mutual fund fire sales. Overall, our results show that accounting quality mitigates stock undervaluation caused by nonfundamental factors.
Item Type: | Journal Article | ||||||||
---|---|---|---|---|---|---|---|---|---|
Alternative Title: | |||||||||
Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance |
||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
||||||||
Library of Congress Subject Headings (LCSH): | Accounting, Institutional investors, Mutual funds, Assets (Accounting) , Liquidity (Economics) | ||||||||
Journal or Publication Title: | European Accounting Review | ||||||||
Publisher: | Routledge, Taylor & Francis Group | ||||||||
ISSN: | 0963-8180 | ||||||||
Official Date: | 2023 | ||||||||
Dates: |
|
||||||||
DOI: | 10.1080/09638180.2023.2241884 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | In Press | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 28 July 2023 | ||||||||
Date of first compliant Open Access: | 16 August 2023 | ||||||||
RIOXX Funder/Project Grant: |
|
||||||||
Related URLs: |
Request changes or add full text files to a record
Repository staff actions (login required)
View Item |
Downloads
Downloads per month over past year