Discretionary Disclosure of Customer Information and Average Stock Returns

July 16, 2013 Leave a comment

Discretionary Disclosure of Customer Information and Average Stock Returns

Li-Wen Chen National Chung Cheng University

Hsin-Yi Yu National University of Kaohsiung

Chia-Tien Kelly Hsieh Durham Business School

July 1, 2013

Abstract: 
Firms with lower levels of disclosure hold more private information and thereby generate undiversified risk. This paper investigates the effect of discretionary disclosure of customer identities on average stock returns. Using a data set of firms’ principal customers, we find a negative relationship between the disclosure level of customer information and the cross-section of returns, after controlling for size, book-to-market ratio, momentum, and other return determinants. We also observe that individual investors are inclined to buy stocks that report more customer information. Overall, poor information on customer identity has higher costs of capital than do firms with good information quality.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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