The Effect of Institutional Investors on the Information Content of Future Earnings in Explaining the Current Return

According to the theory of Information Asymmetry, “Institutional Investors” Could get confidential Information from firm’s managers and present it to investors because they have not only motivation but also expertise and resources in order to supervise the firm. Coefficient of variation is one of the approaches to identifying information content of earning; in this approach, changes in stock prices is a function of changes in earning during a particular period. Therefore, return is related to earning, and coefficient of variation is considered as a measure of information content of earning. The current research aims at investigating the effect of institutional ownership on information content of future earnings. For so doing, one hypothesis is presented and to analyze data, regression model was employed using integrative data. The time period understudy is from 2001 to 2009 and the sample of study includes 80 firms. Using “Future Earnings Response Coefficient”, and having variables such as size, growth and systematic risk controlled, findings indicate that there is a negative relationship between institutional ownership and information content of future earnings.