Work

Fund cliques and firms’ information environment: information efficiency or noise trading?

Year: 2026

Type: article

Abstract: Fund cliques (i.e., mutual funds holding the same stocks) are a common feature of global financial markets, raising the question: How do fund cliques shape firms’ information environment? Do they improve information efficiency or amplify noise trading? Using a sample of Chinese A-share listed companies from 2004 to 2020, we explore the impact of fund cliques on firms’ information environment (measured by stock price synchronicity). Research has found that the increase in the degree of fund clique significantly reduces stock price synchronicity. Our evidence supports the noise trading channel, showing that fund cliques amplify noise trading by reducing the marginal returns of private information acquisition or distorting price signals. Using the unique characteristics of the Chinese market, our paper enriches research on stock price synchronicity and institutional investor behavior, and provides references for emerging capital markets to optimize institutional investor supervision and improve firms’ information environment.

Source: China Journal of Accounting Research

DOI: 10.1016/j.cjar.2025.100460

Authors: Danglun Luo, Zihe Jiang, Xinxuan Zhuang, Jianmei He

Institutions: Sun Yat-sen University, Peking University, Renmin University of China

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,800

Funder: National Natural Science Foundation of China