Institutional Cross-Ownership of Peer Firms and Revelatory Price Efficiency

We argue that cross-ownership increases the amount of private information in stock prices, enhancing the ability of stock prices 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 sensitivit