Abstract

This study examines the relationship between shareholding sizes and stock price informativeness, grounded on the costly acquisition of private firm-specific information. Using data for all non-financial Malaysian public listed companies over the period of 2002–2019, we confirm that the positive relationship between blockholdings and stock price informativeness only holds at the threshold level of 5% and above. Our results provide new evidence that the relationship turns negative for small shareholding sizes, which can be ascribed to the high acquisition costs of private information deterring small shareholders from informed trading. Therefore, regulators and corporate managers should capitalize on modern information technologies to reduce the costs of information acquisition by small investors.