How Professional Are Outsiders to Improve Price Informativeness?

Whether outsiders are professional enough to help insiders make better decisions is a heated discussion in long literature, yet without conclusive empirical evidences. Employing a sample of Chinese listed companies from 2001 to 2019, we examine the professionality of outsiders in-depth based on an extention of price informativeness measures proposed by Bai et al. (2016) at the firm level. Our results show that, introducing professional outsiders, such as funds and analysts with active participation or high quality, will increase price informativeness by 22.05%~23.16% on average. Besides, consistent with theoretical conjectures, professional outsiders are influential through their roles of both external governance and informatin learning. More interestingly, a Pareto improvement in price informativeness is observed after introducing professional outsiders