Governance through trading: Institutional swing trades and subsequent firm performance

David R. Gallagher, Peter A. Gardner, Peter L. Swan*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

40 Citations (Scopus)
30 Downloads (Pure)


 Using unique daily fund-manager trade data, we examine the role of institutional trading in influencing firm performance. We show that short-horizon informed trading by multiple institutional investors effectively disciplines corporate management. Our focus is on short-term swing trades, sequences with three phases (e.g., buy-sell-buy). We find swing trades increase stock price informativeness, are profitable after costs, and improve market efficiency. This increase in stock price informativeness is associated with subsequent firm outperformance. Trades are most beneficial with optimal stock holdings that reflect the information acquisition incentives of investors as well as liquidity costs.

Original languageEnglish
Pages (from-to)427-458
Number of pages32
JournalJournal of Financial and Quantitative Analysis
Issue number2
Publication statusPublished - Apr 2013
Externally publishedYes


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