Journal articles on the topic 'Institutional Investors'
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Lee, Eun Jung, Yu Kyung Lee, and Joon Chae. "Investor Attention and Expected Return." Journal of Derivatives and Quantitative Studies 27, no. 1 (February 28, 2019): 49–83. http://dx.doi.org/10.1108/jdqs-01-2019-b0002.
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In this paper, we analyze the effect of investor attention level on expected return in the Korean stock market by investor type. We find that the risk-adjusted excess returns in the next period are significantly higher when the institutional and foreign investor’s attention is high. In other words, investment strategies that buy stocks in higher attention groups and sell those in lower attention groups provide significant excess returns. This result is in contrast to the argument that the market operates more competitively and moves more efficiently as the number of investors increases due to the increased investor attention. Next, we examine how the degree of attention of institutional, individual, and foreign investors affects each other. The analysis reveals that the attention of individual investors affects the attention of institutional investors in the next period, and vice versa. In addition, as a result of group analysis according to the size of company and stock price, we find that the investor's attention affects the market differently depending on the type of investors and stock price level.
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Song, Chan Young, and Saeyeul Park. "The Investment Horizon of Institutional Investors and Firm Value." East and West Studies 34, no. 2 (June 30, 2022): 275–308. http://dx.doi.org/10.29274/ews.2022.34.2.275.
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This study focuses on the investment horizon of institutional investors in verifying the effect of corporate value on institutional investors, and empirically analyzes the effect on corporate value according to the investment horizon of institutional investors. From 2011 to 2018, we utilize the annual data of 631 companies listed in KOSPI. First, the interaction variables of the investment horizon variables and the rate of the institutional investor shareholding were added to confirm the relationship between the corporate value and those variables. Second, the relationship between the institutional investor ownership and the corporate value was verified after two divisions of the entire sample into long-term and short-term investor groups over the period of the institutional investor's investment. Third, in order to address potential endogeneity concerns, the robustness test was conducted by verifying the relationship between the institutional investor ownership and the corporate value using the 2SLS method.
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Mustilli, Mario, Francesco Campanella, and Eugenio D’Angelo. "Abnormal Returns and Fundamental Analysis in Institutional Investors’ Decision-making: An Agency Theory Approach." International Business Research 11, no. 2 (January 8, 2018): 55. http://dx.doi.org/10.5539/ibr.v11n2p55.
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The purpose of this paper is to investigate the abnormal returns achieved by institutional investors. Distinguishing between institutional investors operating with a specific mandate to invest and those that operate their own choices independently from such a specific delegation, we show that the former achieve higher abnormal returns than the latter. The conceptual explanation of this result is attributable to the use of the fundamental analysis that the first type of institutional investors realized in a higher and more effective way than the second. This different approach in selecting securities might be due to the relationship between the institutional investor and the savers who provided capital. This different agency relationship might have been reflected in the institutional investor's investment policies through the agent behaviour, which changes depending on the nature of the principal who has given the mandate. The empirical analysis has been conducted on a sample of 5,500 institutional investors operating all around the world in 2014, drawing data from institutional investor's annual report, from their investment relations and from Bloomberg, Thomson Reuters, Bankscope, Eurostat and through Computer Assisted Telephone Interviews.
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Jaiyeoba, Haruna Babatunde, Moha Asri Abdullah, and Khairunisah Ibrahim. "Institutional investors vs retail investors." International Journal of Bank Marketing 38, no. 3 (November 25, 2019): 671–91. http://dx.doi.org/10.1108/ijbm-07-2019-0242.
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Purpose Guided by several pioneered studies, the purpose of this paper is to comprehensively investigate the investment behaviours of Malaysian retail and institutional investors in an attempt to identify whether the influence of psychological biases is equally applicable to investor divides. Design/methodology/approach The researchers have adopted a quantitative research design by way of survey methodology to obtain data from institutional and retail investors in Malaysia. In addition, the authors have mainly employed second-order measurement invariance analysis to uncover the difference across investor divides. Findings The tests of measurement invariance at the model level indicate an insignificant difference between institutional investors and retail investors. The post hoc test (at the path level) reveals that institutional and retail investors are similar with respect to representative heuristic, overconfidence bias and anchoring bias; though the results also show that they are different with respect to religious bias and herding bias. Research limitations/implications Based on the findings of this study, it is generally not logical to assume that institutional investors completely behave rational during investment decisions. Besides, future researchers are called upon to directly compare the investment decisions of institutional and retail investors with respect to whether the influence of psychological biases is equally applicable to them, particularly on the investigated psychological biases and other psychological biases that are not covered in this study. Originality/value This study has offered insight into whether the influence of psychological biases is equally applicable to institutional and retail investors in Malaysia using second-order measurement invariance analysis. This study is unique in context and the approach it has adopted.
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Lamb, Reinhold P. "Institutional Investors." International Review of Economics & Finance 12, no. 1 (March 2003): 145–47. http://dx.doi.org/10.1016/s1059-0560(02)00157-0.
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Chandy, Jacob. "Index Returns and Institutional Trading." Shanlax International Journal of Management 9, S1-Feb (February 25, 2022): 218–25. http://dx.doi.org/10.34293/management.v9is1.4863.
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It is acknowledged that only 2% of the Indian public invest in stock markets. This compares with 55% in the USA and about 25% in the EU. The Indian public is therefore a miniscule proportion of investors and the power of the Indian public to move markets is negligible.This means that most trading activity in Indian stock markets are by institutional investors consisting of Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). It seems reasonable to hypothesize that their trading activities influence market returns. This paper aims to verify whether this hypothesis can be sustained by analyzing historical data and calculating statistics such as correlations, regression coefficients and coefficients of determination between FII and DII trading activity and Nifty 500 returns. The key aspects that have been evaluated are buying and selling by these institutional investors. Buy/sell ratios of these institutional investors have also been evaluated since buy/sell ratios are a proxy indicator that indicates the strength of bullishness by these institutional investors.A similar analysis also been done on Mutual Fund trading activity although mutual fund trading activity is normally subsumed under DII trading activity. Since it can be assumed that Mutual Fund trading arises mostly from the ebb and flow of funds from the investing public, they are an important indicator of general public sentiment.Some significant unexpected results have been obtained as the result of the analysis. For example, it has been found that Domestic Institutional Investor buying has negative impact on Nifty 500 return. This is unexpected since it would normally be assumed that an increase in buying by an important constituency such as Domestic Institutional Investor would likely increase Nifty 500 returns on average.
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Verma, Rahul, Gökçe Soydemir, and Tzu-Man Huang. "Are smart beta funds really smart? Evidence from rational and quasi-rational investor sentiment data." Review of Behavioral Finance 12, no. 2 (August 12, 2019): 97–118. http://dx.doi.org/10.1108/rbf-08-2018-0084.
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Purpose The purpose of this paper is to examine the relative effects of rational and quasi-rational sentiments of individual and institutional investors on a set of smart beta fund returns. The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals. Design/methodology/approach The results of the impulse functions generated from a multivariate model suggest that the smart beta fund returns are negatively (positively) impacted by individual (institutional) investor sentiments. Findings The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). Originality/value These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals.
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Le, Thien. "Top institutional investors and accounting comparability." Corporate Ownership and Control 18, no. 4 (2021): 42–66. http://dx.doi.org/10.22495/cocv18i4art4.
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This study examines the relation between firm pair’s sharing of a top institutional investor (i.e., an institutional investor with the largest shareholding) and accounting comparability. Using data from Compustat, CRSP, and Thompson Reuters over the 1993–2017 period, the study finds that firm pairs that share the top institutional investor exhibit higher accounting comparability than other firm pairs. In addition, firm pairs whose top institutional investors are monitoring institutions (regardless of whether they are the same institutions) exhibit greater comparability than other firm pairs whose top institutional investors are non-monitoring institutions. Collectively, the study contributes to existing research on accounting comparability and large institutional investors by showing that the sharing of top institutional investors is an important determinant of accounting comparability
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Wang, Jianye, Yubing Ke, Huixue Zhang, and Yusi Cheng. "Which institutional investors can improve the level of corporate ESG information disclosure?" PLOS ONE 18, no. 11 (November 17, 2023): e0290008. http://dx.doi.org/10.1371/journal.pone.0290008.
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The inconsistency of existing findings on the relationship between institutional investors’ shareholdings and the level of corporate Environmental, Social and Governance (ESG) disclosure may lie in the insufficient consideration of the heterogeneity of institutional investors and investee firms. In this paper, from the perspective of institutional investor heterogeneity, we use a two-way fixed effects model to examine the impact of institutional investors on corporate ESG disclosure and the possible mechanism of this impact using a sample of Chinese A-share-listed firms from 2012 to 2020. We show that institutional investor shareholding can improve the level of corporate ESG information disclosure by enhancing auditor supervision and analyst attention to these external supervision. In terms of institutional investor heterogeneity, it is found that independent institutional investors and stable institutional investors play a stronger role in promoting the level of ESG information disclosure. Moreover, the positive net effect of the institutional investors on improving the level of ESG information disclosure is more pronounced in non-heavily polluting industries and state-owned enterprises. This paper enriches the impact of institutional investors’ shareholding on corporate ESG disclosure from a heterogeneity perspective.
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Vazhynskyi, Volodymyr, Mykola Pohoretskyi, and Zoriana Toporetska. "ASSESSMENT OF KEY MARKETS FOR INSTITUTIONAL INVESTORS IN UKRAINE IN THE CONTEXT OF WAR." Baltic Journal of Economic Studies 9, no. 4 (November 17, 2023): 44–49. http://dx.doi.org/10.30525/2256-0742/2023-9-4-44-49.
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The article is devoted to the assessment of key markets for institutional investors in Ukraine in the context of Russia's full-scale invasion. The purpose of this study is to assess the institutional investor market in Ukraine during the war. To achieve this goal, it is necessary to solve the following tasks: to study the legal status of an institutional investor in Ukraine and its types, to assess changes in the institutional investor market after the start of a full-scale invasion, to identify key risks that exist in the market now, and to provide proposals on the need to improve state regulation of the institutional investor market to protect citizen investors in times of war. The methodological basis of the study was formed by general scientific methods of cognition: the dialectical method of cognition of the phenomena of the surrounding reality and the comparative legal method for establishing the legal status of an institutional investor, methods of logic (analysis, synthesis, induction, deduction, analogy), economic analysis, absolute and comparative advantages and statistical methods for analysing the market of institutional investors and making proposals, mathematical methods for calculating the volume of the market of institutional investors. In accordance with the systemic and structural approach, the institutional investor market was assessed by each of the structural elements of this market. The authors propose to consider an institutional investor as a financial intermediary that attracts and accumulates funds of individual investors (consumers of financial services) and carries out investment activities in the interests of individual investors aimed at financing socially and economically important sectors of the economy for the state and society. The authors pay special attention to the concept of responsible business conduct, pointing out that today, socially responsible business conduct is extremely important for the activities of an institutional investor, which includes "responsible attraction (accumulation) of funds" and "responsible spending (investment) of investors' funds". The study found that the main markets for institutional investors in Ukraine – banking, insurance and private pensions – showed stability and a slight increase in key indicators, which is very positive for Ukraine today. However, in the long term, there are a number of risks that should be taken into account by the government when formulating the state policy on the activities of institutional investors in these markets to protect the interests of citizen investors. The article provides suggestions on the main areas of improvement of the legislation on the activities of institutional investors to minimise the risks of citizen investors.
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Kim, Kyung Soon, Jinwoo Park, and Yun W. Park. "Differential informativeness of analyst reports by investor types." Managerial Finance 43, no. 5 (May 8, 2017): 567–94. http://dx.doi.org/10.1108/mf-06-2016-0166.
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Purpose The purpose of this paper is to investigate whether there is any difference across individual investors, domestic and foreign institutional investors in trading volume responses to analyst reports. The authors also examine the determinants of trading volume responses using firm as well as forecast characteristics. Design/methodology/approach The authors use trading data from the Korean equity market. The authors divide investors into three classes of investors; namely, individual investors, domestic institutional investors, and foreign institutional investors. The authors then examine whether the trading responses to analyst reports vary across investor types, and how firm characteristics and characteristics of analyst reports influence the trading activities on the release dates across investor types. Findings Individual investors are the most responsive investor group, being responsive to analyst reports on small, neglected firms with large inside ownership as well as to analyst reports with optimistic forecasts. Domestic institutional investors are responsive to reports on neglected firms with high return volatility while foreign institutional investors show least responses. Originality/value There are few studies that investigate whether the trading responses to analyst reports vary across investor types and how firm characteristics and characteristics of analyst reports influence the trading activities on the release dates across investor types. Taking advantage of the trading volume data for the three main investor types in the Korean stock market, the authors study the trading volume responses for each investor type and make comparisons across investor types.
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Melis, Danielle A. M., and André Nijhof. "The role of institutional investors in enacting stewardship by corporate boards." Corporate Governance: The International Journal of Business in Society 18, no. 4 (May 10, 2018): 728–47. http://dx.doi.org/10.1108/cg-09-2017-0210.
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Purpose This paper aims to clarify the relationship between the voting and engagement behaviour of institutional investors, i.e. institutional investor stewardship behaviour, and the enactment of stewardship by corporate boards. In doing so, this paper contributes to the evaluation of contemporary corporate governance systems and provides recommendations for the redesign of these systems. Design/methodology/approach This paper is based on a qualitative exploratory descriptive research study into assumed, prescribed and the actual behaviour of institutional investors. Their behaviour is explored through a survey and in-depth interviews with global institutional investors. Findings The prescription of institutional investor stewardship behaviour and the exploration of actual behaviour from an investors’ perspective led to the conclusion that assumed institutional investor stewardship exists variously as either “in form” (i.e. measured by compliance to the relevant corporate governance code) or “in substance” (i.e. the actual behaviour from the investors and investee companies’ perspective). The results suggest that that institutional investors’ actual stewardship behaviour as global investors requires a nuanced conclusion about the existence of institutional investor stewardship. Research limitations/implications Although the number of semi-structured interviews with institutional investors was limited to just 14, these interviewees represent the majority share in terms of market capitalisation of Dutch listed companies. Additional research could clarify the perspective of other investors, such as pension funds and private investors. Practical implications The outcome of this research can serve as input for corporate governance reforms in the preambles of governance codes and the prescribed principles and best practice provisions of corporate governance and stewardship codes. This research identifies opportunities for further academic research to enrich the understanding of the role of institutional investors in enacting corporate stewardship. Social implications This paper contributes to furthering the understanding of the mechanisms by which institutional investors, through their behaviour, contribute to enacting stewardship through their corporate boards. This is an important part of the corporate social responsibility of institutional investors. It also triggers a dialogue about the social and environmental impacts of stock listed companies. Originality/value This paper fulfils an identified need to develop knowledge about new paradigms and offers a more integrated approach to corporate governance reforms in terms of the role of institutional shareholders in the promotion of good corporate governance.
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Schmidt, Daniel. "Distracted Institutional Investors." Journal of Financial and Quantitative Analysis 54, no. 6 (October 8, 2018): 2453–91. http://dx.doi.org/10.1017/s0022109018001242.
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I investigate how distraction affects the trading behavior of professional asset managers. Exploring detailed transaction-level data, I show that managers with a large fraction of portfolio stocks that have an earnings announcement are significantly less likely to trade in other stocks, suggesting that these announcements divert attention from trading decisions for other stocks. This distraction effect is more pronounced for nonpassive managers who engage in active stock selection choices. Finally, I identify three channels through which distraction hurts managers’ performance: Distracted managers trade less profitably, incur slightly higher transaction costs, and are less likely to close losing positions.
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Nan, Wang. "The Influence of Institutional Investors' Position on Stock Momentum Phenomenon." Highlights in Business, Economics and Management 17 (August 31, 2023): 260–70. http://dx.doi.org/10.54097/hbem.v17i.11296.
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Momentum phenomenon is one of the most classic anomalies in the field of securities investment. This paper investigates the influence of institutional investors' opening behavior on stock return momentum phenomenon by using the annual investor shareholding data publicly disclosed by listed companies. The findings are as follows: First, there is a positive correlation between institutional investors' opening behavior and stock excess return in one year; Second, if there is an obvious momentum phenomenon in the stock return in the first two years, then the stock return in the next year still depends on the institutional investor's position behavior, and has nothing to do with the investor's momentum strategy. Under the condition that other conditions remain unchanged, for the positive momentum group, if institutional investors buy portfolios substantially in the next year, the stock momentum phenomenon will continue; On the contrary, stock reversal occurs. A similar conclusion was found for the negative momentum group. In addition, the study also found that the momentum phenomenon is statistically significant, but because stock returns cannot be predicted in advance, it is not meaningful in the actual investment process. Therefore, this paper supports and complements the efficient market hypothesis to some extent.
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Lauterbach, Beni, and Yevgeny Mugerman. "The Effect of Institutional Investors’ Voice on the Terms and Outcome of Freeze-out Tender Offers." Quarterly Journal of Finance 10, no. 01 (February 14, 2020): 2050002. http://dx.doi.org/10.1142/s2010139220500020.
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We study the impact of institutional investors’ “voice” on 201 going private tender offers by controlling shareholders (“freeze-out” offers) in Israel. Israeli regulatory intervention in freeze-out tender offers is relatively mild; thus, institutional investors’ activism becomes crucial. We find that institutional voice has dual effects. On one hand, when there are pre-negotiations with institutional investors’ (their voice is heard), accepted offers’ premiums increase. On the other hand, when institutional investors express their voice, yet reject the offer, these rejections appear to hurt shareholders’ value. We also document significant institutional investor exit after rejected offers, especially after offers preceded by voice (pre-negotiations with institutional investors).
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Marietza, Fenny, and Indah Oktari Wijayanti. "PENGARUH PANDANGAN INVESTASI INVESTOR INSTITUSIONAL TERHADAP KREDIT RATING PERUSAHAAN." Nominal: Barometer Riset Akuntansi dan Manajemen 10, no. 2 (September 29, 2021): 293–303. http://dx.doi.org/10.21831/nominal.v10i2.30256.
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Abstrak: Pengaruh Pandangan Investasi Investor Institusional Terhadap Kredit Rating Perusahaan. Penelitian ini bertujuan untuk mengetahui seberapa besar peran investor institusi terhadap kenaikan atau penurunan rating kredit di Indonesia. Objek penelitian ini adalah perusahaan yang terdaftar di Bursa Efek Indonesia dari tahun 2017-2018. Pemilihan sampel dalam penelitian ini menggunakan metode purposive sampling. Berdasarkan hasil penelitian dengan menggunakan bantuan software SPSS dapat diambil kesimpulan sebagai berikut: pandangan investor terhadap kredit rating perusahaan secara signifikan terbukti berpengaruh. Pandangan investasi investor institusional diduga memiliki peran tata kelola untuk menjaga dan mengawasi efek dari asimetri informasi. Investor institusi yang cenderung memiliki pandangan investasi jangka panjang lebih memainkan peran pengawasan dibandingkan dengan investor institusional yang memiliki pandangan investasi jangka pendek sehingga adanya rating kredit mempengaruhi kebijakan penagawasan.Kata Kunci: Pandangan Investasi, Investor Institusional, Kredit Rating PerusahaanAbstract: The Effect of Institutional Investor Investment Views on Company Kredit Rating. This research aims to find out how much the role of institutional investors in the increase or decrease in kredit ratings in Kredit. The object of this research is companies listed on the Kredit Stock Exchange from 2017-2018. The sample selection in this study uses a purposive sampling method. Based on the results of research using SPSS software the following conclusions can be drawn: the investor’s view of the company’s kredit rating is significantly proven to be influential. The view of institutional investor investment is thought to have a governance olet o safeguard and oversee the effects of information asymmetry. Institutional investors who tend to have a long-term investment view play a supervisory role more than institutional investors who have a short-term investment view so that the kredit rating influences supervision policies.Keywords: Institutional Investor, Investment Views, Company Credit Rating
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Qian, Rui. "Institutional Investors: A Literature Review." SHS Web of Conferences 169 (2023): 01066. http://dx.doi.org/10.1051/shsconf/202316901066.
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We survey the related theories and burgeoning literature on the consequences of institutional investors’ holdings and shareholder activism campaigns. Agency theory, monitoring theory, and limited attention theory are widely used in institutional investors studies. About the economic consequences of institutional investors’ holdings, we summarize that institutional holdings could improve corporate disclosure quality and frequency, for both mandatory and voluntary information disclosure. Additionally, higher ownership concentration of institutional investors is related to higher performance sensitivity of management compensation and lower compensation level. Furthermore, we propose that investor holdings could also affect dividend policy, firm performance and firm innovation. Lastly, we further discussed about shareholder activism campaign. We find that shareholder activism has both positive effect on firm performance and corporate governance, and negative side on executives and threats of exit.
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Cui, Ziyi. "Heterogeneous Institutional Investor Attention and Corporate Tax Avoidance Behavior." Frontiers in Management Science 3, no. 2 (April 2024): 77–91. http://dx.doi.org/10.56397/fms.2024.04.09.
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This paper selects A-share listed company stocks in China between 2009 and 2021 as the research object, and from the perspective of investment portfolio, empirically investigates the impact of two types of institutional investor (pressure-resistant and pressure-sensitive) attention on corporate tax avoidance behavior. It is found that institutional investors’ willingness to participate in corporate governance is jointly influenced by their own nature and their investment portfolio. Pressure-resistant monitoring institutional investors can effectively inhibit corporate tax avoidance behavior and play a positive governance role, while pressure-sensitive monitoring institutional investors show the opposite governance effect. The influence mechanism test shows that heterogeneous monitoring institutional investors influence corporate tax avoidance behavior by changing the degree of corporate information asymmetry. Heterogeneity tests show that the impact of heterogeneous monitoring institutional investors on corporate tax avoidance behavior is more pronounced in firms with poorer legal environments and in non-state-owned firms. This paper explores the impact of heterogeneous institutional investor attention on corporate tax avoidance behavior from the perspective of portfolio, providing theoretical basis for the Securities and Futures Commission (SFC) to differentially guide institutional investors to actively participate in governance.
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Dou, Zhenjiang, Lei Wei, and Jingyi Wang. "Institutional Investor, Economic Policy Uncertainty, and Innovation Investment: Evidence from China." E+M Ekonomie a Management 24, no. 1 (March 2021): 4–20. http://dx.doi.org/10.15240/tul/001/2021-1-001.
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As a participator in corporate investment decision-making, the institutional investor is directly related to the corporate innovation investment. However, the economic policy uncertainty is aggravated by problems, such as economic slump and trade friction. Thus, institutional investors are not optimistic about the prospects of innovation investment. To explore the influence of institutional investors on corporate innovation investment from the perspective of economic policy uncertainty, using the 2010–2018 panel data in China and the fixed effect model, the influences of institutional investors on innovation investment and the moderating effects of the economic policy uncertainty were analyzed. Results show that institutional investors facilitate corporate innovation investment. Moreover, the increasing economic policy uncertainties repress the promoting effect of institutional investors on innovation investment. Furthermore, the institutional investors boost the corporate innovation investment by improving the internal control and relieving the financing constraints. For private companies, new and high-tech companies, the promoting effect of institutional investors on the corporate innovation investment is inhibited by the economic policy uncertainty to a small extent. For the listed companies located in areas with a high level of investor protection and intellectual property protection, the economic policy uncertainty has a minimal influence on the institutional investors and corporate innovation investment. The conclusions obtained from this study provide empirical evidence for giving full play to the role played by institutional investors in corporate innovative development. The conclusions also reveal, from the macroscopic level, that the consistency and stability of governmental economic policies have important effects on corporate development.
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TAN, Petrina Tjin Yi. "Institutional Investor Stewardship in the UK and Malaysia: Functionally Similar, Contextually Challenged." Asian Journal of Comparative Law 14, no. 2 (November 11, 2019): 279–304. http://dx.doi.org/10.1017/asjcl.2019.31.
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AbstractInstitutional investors are acknowledged as an influential force in markets worldwide. As a result of increased focus on the impact from the investing and shareholding practices of institutional investors, stewardship codes were first introduced in the UK, followed by Malaysia. This article evaluates the theory and practice of institutional investor stewardship in Malaysia through functional and contextual lenses, as juxtaposed against the more established position of stewardship in the UK. Notwithstanding an analogous legal framework for shareholder rights and the textual similarities of the UK Stewardship Code and Malaysian Code for Institutional Investors, the dominance of government-linked investment companies and government-linked companies in Malaysia results in a distinct set of issues in relation to institutional investor stewardship. This article then argues that the stewardship codes are in themselves insufficient in increasing the quality and scope of institutional investor engagement as they fail to address the underlying agency conflicts between the institutional investors and ultimate beneficiaries or clients. In learning from the UK's experience, it is important that Malaysian policymakers pay attention to the overarching structural factors and incentives driving institutional investor engagement alongside the development and take-up of the stewardship code.
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Blouin, Jennifer L., Brian J. Bushee, and Stephanie A. Sikes. "Measuring Tax-Sensitive Institutional Investor Ownership." Accounting Review 92, no. 6 (February 1, 2017): 49–76. http://dx.doi.org/10.2308/accr-51719.
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ABSTRACT We classify all institutional investors that file Form 13-F over the period 1995–2013 as either “tax-sensitive” or “tax-insensitive” based on their trading behavior and portfolio characteristics. We examine tests of the effects of investor tax-sensitivity on portfolio rebalancing, price pressure, and fund performance, and compare our measure of tax-sensitive institutional investor ownership to three measures used in prior studies. We show that our measure of tax-sensitive investors dominates other measures in the portfolio rebalancing and price pressure tests. In the fund performance test, our measure of tax-sensitivity is the only one that finds that tax-sensitive investors have significantly lower returns on their portfolio stocks, which is a new result in the literature. JEL Classifications: G11; G20; H24.
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Ming, Tee Chwee, Yee-Boon Foo, Ferdinand A. Gul, and Abdul Majid. "Institutional Investors and CEO Pay Performance in Malaysian Firms." Journal of International Accounting Research 17, no. 1 (January 1, 2018): 87–102. http://dx.doi.org/10.2308/jiar-51989.
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ABSTRACT This study uses Malaysian data to examine whether institutional investors affect the association between firm performance and CEO compensation. Overall, we find that total institutional investor ownership has a negative effect on the positive association between firm performance and CEO compensation, which suggests ineffective monitoring. When the institutional investors are categorized into local and foreign, we find that the negative effect is driven by local institutional ownership, consistent with the argument that foreign institutional investors are associated with better monitoring. Our results provide new insights on the association between institutional investors and the CEO compensation-firm performance relationship in an emerging economy. JEL Classifications: G34; J33.
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Li, Pengchong, Zixuan Chen, and Xiang Li. "A Study of Institutional Investors' Shareholding and Corporate Risk-Taking." Highlights in Business, Economics and Management 5 (February 16, 2023): 431–38. http://dx.doi.org/10.54097/hbem.v5i.5119.
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This paper analyzes the relationship and impact of stress-resistant institutional investors and stress-sensitive institutional investors on institutional investors' shareholding on corporate risk-taking, using a sample of A-share listed companies in Shanghai and Shenzhen from 2011 to 2020. It was found that (1) the shareholding ratio of stress-resistant institutional investors was negatively related to the level of corporate risk-taking; (2) while the shareholding ratio of stress-sensitive institutional investors was not significantly related to the level of corporate risk-taking. Studying the impact of institutional investor shareholding on corporate risk-taking, and implementing effective measures to improve the level of corporate risk-taking will help corporates to develop healthily and the economy to grow steadily.
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Ahmed, Walid M. A. "The trading patterns and performance of individual vis-à-vis institutional investors in the Qatar Exchange." Review of Accounting and Finance 13, no. 1 (February 4, 2014): 24–42. http://dx.doi.org/10.1108/raf-09-2012-0089.
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Purpose – The main thrust of the present study is to look into the trading patterns of behavior and investment performance exhibited by individual and institutional investor categories in the Qatar Exchange (QE). The paper aims to discuss these issues. Design/methodology/approach – The present study uses daily aggregated investment flows made separately by each investor group, as well as daily closing price observations of the QE stock composite index. The trading patterns of investor categories are examined by estimating a bivariate vector autoregressive process of order p, VAR (p). To determine whether each category performs well or poorly over the entire sample period, each investor category's cumulative returns are estimated and analyzed. Findings – The empirical results reveal that institutional investors pursue positive feedback trading strategies, whereas individual investors tend to be negative feedback traders. Both investor categories appear to be engaged in herding behavior. Additionally, institutional investors perform well over almost the entire sample period. In contrast, individual investors' negative market timing ability dominates their overall poor performance. Practical implications – The investment performance gap found between institutional investors and individual investors in the Qatari capital market may reflect a large information asymmetry in favour of the former category. Indeed, the poor performance of individual investors implies that their trading activities are generally driven by factors and considerations that are irrelevant to fundamentals. Moreover, their irrational trading decisions may play some role in the formation of asset price bubbles. Originality/value – The present study makes the first attempt to provide empirical evidence on the investment patterns and performance of individual and institutional investors trading on the Qatari capital market.
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Tsang, Albert, Fei Xie, and Xiangang Xin. "Foreign Institutional Investors and Corporate Voluntary Disclosure Around the World." Accounting Review 94, no. 5 (January 1, 2019): 319–48. http://dx.doi.org/10.2308/accr-52353.
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ABSTRACT We examine the impact of foreign institutional investors on firms' voluntary disclosure practices measured by management forecasts. In a sample of 32 non-U.S. countries, we find that, on average, foreign institutional investments lead to improved voluntary disclosure, and their impact is larger than that of domestic institutional investors. These results are more pronounced when foreign institutional investors (1) are unfamiliar with the firm's home country, (2) have longer investment horizons, and (3) are from countries with stronger investor protection and disclosure requirements than the firm's home country. However, we also find some evidence of voluntary disclosure deterioration in firms with foreign institutional investors from countries with inferior disclosure requirements and securities regulations and with concentrated foreign institutional ownership. Overall, our results suggest that the relation between foreign institutional investors and voluntary disclosure is much richer and more complex than what has been documented for domestic institutional investors in the literature.
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Akron, Sagi, and Taufique Samdani. "Investor protection and institutional investors’ incentive for information production." Journal of Financial Stability 30 (June 2017): 1–15. http://dx.doi.org/10.1016/j.jfs.2017.03.001.
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Park, Sorah. "Differential Effect Of The Sarbanes-Oxley Act On Individual And Institutional Investors." Journal of Applied Business Research (JABR) 32, no. 2 (March 1, 2016): 517. http://dx.doi.org/10.19030/jabr.v32i2.9593.
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This study investigates the differential effect of the Sarbanes-Oxley Act of 2002 (“SOX”) on unsophisticated individual investors and sophisticated institutional investors. I examine the relationship between abnormal stock returns around quarterly earnings announcements before and after SOX and investor sophistication. Empirical test results show that SOX positively affected stock returns reaction around the quarterly earnings announcement, consistent with prior literature. However, the increased stock returns reaction in the post-SOX period appears to be unrelated to individual investors. I find that the impact of SOX on institutional investor reaction to earnings announcement is statistically significant, whereas individual investor reaction to earnings announcement is not affected by SOX. This suggests that institutional investors have improved on the extent to which earnings information is efficiently priced after SOX, but not individual investors. These findings are important because the differential effect of the accounting disclosure regulation on investors has received little attention in the literature.
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Meng, Yun, and Xiaoqiong Wang. "Do institutional investors have homogeneous influence on corporate social responsibility? Evidence from investor investment horizon." Managerial Finance 46, no. 3 (November 20, 2019): 301–22. http://dx.doi.org/10.1108/mf-03-2019-0121.
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Purpose The purpose of this paper is to investigate the relation between the investment horizon of institutional investors and corporate social responsibility (CSR). Design/methodology/approach Utilizing unique datasets on CSR and the investor horizon measures (Gaspar et al., 2005), the authors categorize institutional investors into long-term and short-term investors. This method captures the heterogeneity of investors. Findings The authors show that long-term institutional investors promote CSR engagement, while short-term investors discourage it. The authors further document that shareholders’ ownership horizon has implications on corporate decisions in the CSR framework. The presence of long (short)-term institutional investors is positively (negatively) associated with dividend payout, discourages (encourages) managerial misbehaviors and enhances (reduces) firm valuation, only for firms with high CSR performance. Research limitations/implications Different from previous studies that treat institutional investors homogeneously, this paper provides empirical support that investors are indeed different in influencing CSR. Originality/value Few prior studies address the question of whether active engagement by institutional shareholders on CSR issues differs by the types of institutional ownership. The study attempts to fill this gap by examining the effects of institutions’ investment horizon, one of the major ways to classify institutional shareholders, on the CSR performance of firms.
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Yu, Qitong, Shaoyang Fang, and Jianjun Wang. "A Study on the Influence of Institutional Investor Heterogeneity on the Executive Pay Stickiness——Based on the Perspective of Industrial Factor Intensity." International Journal of Economics and Finance 10, no. 9 (August 30, 2018): 168. http://dx.doi.org/10.5539/ijef.v10n9p168.
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Based on the data of Shanghai and Shenzhen A-share listed companies from 2012-2016, this paper empirically studies the influence of heterogeneous institutional investors on executive compensation stickiness of listed companies by using the method of multiple regression. The results show that the pay stickiness is very common in the listed companies. The overall institutional investor’s shareholding is promoting the executive compensation stickiness. The empirical results show that the institutional investors are divided into the pressure resistance institutional investors and the pressure sensitive institutional investors, according to whether the institutional investors have the commercial relationship with the listed companies. The empirical results show that they are compared to the pressure. Sensitive institutions, pressure resistance institutional investors can significantly inhibit the stickiness of executive compensation. However, different types of institutional investors have different preferences for the types of listed companies, and the enthusiasm of participating in corporate governance is different, and the pressure resistance institutional investors pay more attention to labor out of social responsibility. The long-term performance of a force intensive enterprise has a significant inhibitory effect on the stickiness of the executive compensation, while the pressure sensitive institutional investors actively manage and supervise the production and operation of the technology intensive enterprises for the consideration of the investment income, which has a restraining effect on the pay stickiness of the technology intensive enterprises.
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Wang, Xiaoqiong, and Siqi Wei. "The monitoring role of institutional investors." Studies in Economics and Finance 36, no. 4 (October 7, 2019): 517–46. http://dx.doi.org/10.1108/sef-11-2017-0309.
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Purpose This paper aims to examine the monitoring role of institutional investors in corporate decision-making by classifying financial institutions based on geographical proximity and investment horizon from 1980 to 2014. Design/methodology/approach By using unique data sets on firm and institution location and investor horizon measure (Gaspar et al., 2005), the authors categorize institutional investors into six proximity-horizon classifications. This method captures the heterogeneity of investors. The corporate decisions assessed include firm investment, financing, payout policy, misbehavior, takeover defenses and profitability. Findings Both geographical proximity and investment horizon are directly related to institutional investors' monitoring cost. As a result, the effectiveness of institutional monitoring may vary based on geographical proximity and investment horizon. This paper collectively examines both dimensions of financial institutions and provides evidence that institutional investors present different preferences for corporate policies. Given stronger information advantage, both local and nonlocal investors that are long-term oriented fulfill better roles in monitoring corporate decisions but from different perspectives. Research limitations/implications Different from previous studies that treat institutional investors homogeneously, this paper provides empirical support that investors are indeed different in influencing firm policies. Originality/value To the authors’ best knowledge, this is the first study that classifies investors based on two dimensions, geographical proximity and investment horizon, and examines their joint effects on corporate policies. This proximity-horizon classification allows the authors to better disentangle the effects of institutional ownership structure on the monitoring outcomes.
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Gao, Bin, Huanhuan Hao, and Jun Xie. "Does retail investors beat institutional investors?——Explanation of game stop’s stock price anomalies." PLOS ONE 17, no. 10 (October 25, 2022): e0268387. http://dx.doi.org/10.1371/journal.pone.0268387.
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This paper studies the relation of information cost, retail investor sentiment and asset pricing. Our motivation to study this model is to learn why retail investors could move asset price away from fundamental values. In the model, the institutional investors are pessimistic and the retail investors are optimistic, the ratio of the expected utility of informed and rational but uninformed institutional investors increases first and then decreases as the cost of information increases. In addition, a large number of retail investors promoted substantial increases in stock prices. This model provides part of the explanation for the unusually high stock price of Game Stop in early 2021 that retail investors cliqued and confronted institutional investors.
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Liao, Jia, Yun Zhan, and Yu Yuan. "Institutional investors’ site visits and investment-cash flow sensitivity: Mitigating financing constraints or inhibiting agent conflicts?" PLOS ONE 19, no. 3 (March 28, 2024): e0300332. http://dx.doi.org/10.1371/journal.pone.0300332.
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Taking Chinese non-financial A-share companies listed on the Shenzhen Stock Exchange (SZSE) between 2003 and 2018 as a sample, this paper empirically examines whether and how institutional investors’ site visits (SVs) affect corporate investment-cash flow sensitivity (ICFS). The results show that institutional investors’ SVs can reduce ICFS, and this effect is more obvious for companies with fewer investment opportunities, larger sizes, higher internal cash flows, and higher agency costs, indicating that institutional investors’ SVs primarily inhibit ICFS caused by agency conflicts rather than financing constraints. In addition, the inhibitory effect of institutional investors’ SVs on ICFS exists mainly in companies with poor internal supervision governance and weak executive compensation incentive mechanisms, indicating that institutional investors’ SVs and other forms of corporate governance mechanisms operate as substitutes in reducing ICFS. This paper reveals the important role of institutional investors’ SVs in reducing ICFS, with important theoretical and practical implications for regulators to progressively regulate and promote this form of investor activity.
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Bertolotti, Andre. "ESG and Institutional Investors." CFA Institute Magazine 21, no. 3 (May 2010): 14–15. http://dx.doi.org/10.2469/cfm.v21.n3.4.
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Pound, John, and Robert J. Shiller. "Are institutional investors speculators?" Journal of Portfolio Management 13, no. 3 (April 30, 1987): 46.1–52. http://dx.doi.org/10.3905/jpm.1987.13.3.46.
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Pound, John, and Robert J. Shiller. "Are Institutional Investors Speculators?" Journal of Portfolio Management 13, no. 3 (April 30, 1987): 46.2–52. http://dx.doi.org/10.3905/jpm.1987.46.
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Kling, Gerhard, and Lei Gao. "Chinese institutional investors’ sentiment." Journal of International Financial Markets, Institutions and Money 18, no. 4 (October 2008): 374–87. http://dx.doi.org/10.1016/j.intfin.2007.04.002.
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Jacob, Chacko, and Jijo Lukose P.J. "Institutional Ownership and Dividend Payout in Emerging Markets: Evidence from India." Journal of Emerging Market Finance 17, no. 1_suppl (February 23, 2018): S54—S82. http://dx.doi.org/10.1177/0972652717751538.
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We examine the relationship between institutional investor ownership and dividend payouts using a large sample of NSE-listed non-financial firms during the period 2001 to 2016. Consistent with the evidence from the US market, institutional investors, on average, have larger holdings in dividend-paying firms and are seen to prefer dividend payers over non-payers among larger firms. However, among smaller firms, institutional investors seem to prefer non-paying firms. Consistent with it, logistic regression results reveal that institutional investors do improve a firms’ propensity to pay dividends, primarily across large firms. Further, among dividend-paying firms, institutional investors, on average, are observed to have relatively lesser holdings in firms with higher payouts than those with lower payouts. In line with these observations, regression analysis also provides no evidence to support a positive relationship between total institutional ownership and payout level. However, across investor categories, we do find evidence for domestic institutional investors (DII) in improving payouts. Further, we use a dynamic panel GMM estimator to correct for endogeneity and find that the relationship is robust among large firms. Our results highlight the role of DII in improving dividend payout and provide support to models that predict a positive relationship. JEL Classification: G23, G32, G34, G35
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Ringe, Wolf-Georg. "Investor Empowerment for Sustainability." Review of Economics 74, no. 1 (April 1, 2023): 21–52. http://dx.doi.org/10.1515/roe-2023-0016.
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Abstract The transition to a sustainable economy currently involves a fundamental transformation of markets and market actors. This paper makes the case for investor empowerment as the main tool towards achieving greater sustainability in capital markets. This trust in institutional investors is grounded in various recent developments both on the supply side and the demand side of financial markets, and also in the increasing tendency of institutional investors to engage in common ownership. The need to build coalitions among different types of asset managers or institutional investors, and to convince fellow investors of any given initiative, can then act as an in-built filter helping to overcome the pursuit of idiosyncratic motives and supporting only those campaigns that are seconded by a majority of investors. In particular, institutionalized investor platforms have emerged over recent years as a force for investor empowerment, serving to coordinate investor campaigns and to share the costs of engagement. ESG engagement has the potential to become a very powerful driver towards a more sustainability-oriented future. Any regulatory activity should then be limited to a facilitative and supportive role.
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Clark, Gordon L., Sarah McGill, Yukie Saito, and Michael Viehs. "Institutional shareholder engagement with Japanese firms." Annals in Social Responsibility 1, no. 1 (June 8, 2015): 30–56. http://dx.doi.org/10.1108/asr-12-2014-0003.
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Purpose – The purpose of this paper is to explore how shareholder engagement on environmental, social, and governance (ESG) issues is informally exercised by a large global institutional investor with locally embedded, geographically remote firms. This field is still a new area of research due to a scarcity of data, and because ordinarily, private engagement activities are conducted confidentially. Therefore, the paper aims to fill this gap in the literature by studying the private corporate engagement activities of a large UK-based institutional investor on ESG issues with Japanese investee firms in order to achieve a greater understanding of the under-researched area of corporate social responsibility. Design/methodology/approach – The authors employ a multi-method approach to analyse engagement activities by the institutional investor. The authors have obtained a unique data set of the institutional investor’s engagement activities. The institutional investor is UK-based, has a long history of active engagement, and is considered one of the oldest and largest specialists in responsible investment. Further, the authors have conducted several in-depth interviews with a UK-based ESG service provider as well as one of the largest Japanese trust companies. Findings – First, it is found that main target firms of engagement activities are large firms with global operations, and that corporate governance issues are the most important engagement topic in Japan. Second, in trying to effectively exercise voice across societies, engagement activities are conducted with geographically remote target firms on various ESG agendas in a self-enforcing, face-to-face, and sometimes collective manner. Finally, this study argues for the gap between the asset manager’s motivation to engage and local target firms’ readiness to respond due to corporate organisational and language issues. Originality/value – The authors contribute to social responsibility literature by focusing on the role of global investors in Japan to diffuse global standards. This area has been largely neglected in this stream of literature, despite the increasing presence of foreign investors in Japan. This is one of the first attempts to analyse a global investor’s engagement strategies with one specific country outside of the USA and Europe. Further, within the literature on shareholder engagement, this is the first paper that focuses on the means of engagement activities and the responses by target firms.
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Li, Yuedong, Xianbing Liu, and Qing Yan. "Is institutional investor a supervisor or cooperator?" Nankai Business Review International 9, no. 1 (March 5, 2018): 2–18. http://dx.doi.org/10.1108/nbri-02-2017-0007.
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Purpose The purpose of this paper is to discuss whether top management will assume their liabilities especially when financial restatement occurs, and,based on the “effective supervision theory” and “strategic cooperation theory,” to examine whether an institutional investor is a supervisor or a cooperator considering the management turnover caused by financial restatement in the companies. Design/methodology/approach Using a sample of the A-share-listed companies from year 2010 to year 2014 and dividing financial restatement into fraudulent financial restatement and other financial restatement, the authors examine the relationship between financial restatement and abnormal management turnover, which usually is related to the management integrity or capacity. By using group test methods, the authors test the influence of the institutional investors’ shareholding on the relation between financial restatements and management turnover. Findings This paper finds that financial restatement can result in abnormal management turnover, especially the fraudulent financial restatement. The institutional investors usually are supervisors but when the shareholding of institutional investor is too high and the management turnover results from fraudulent financial restatement, the institutional investors may become cooperators with management in the companies. Besides, the institutional investors play the supervisory function more significantly in non-state-owned enterprises. Originality/value This paper expands literature of the institutional investors in the corporate governance area and provides a basis for future research in the area of the institutional investors’ governance effect. It divides financial restatements into fraudulent financial restatement and other financial restatement and examines the relationship between financial restatement and abnormal management turnover so as to provide evidence about whether the management will assume their responsibilities when there is financial restatement in the company. It also tests whether the institutional investors will play supervisor’s or cooperator’s function in state-owned and non-state-owned enterprises.
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Farhan, Muhamad, and Sung Suk Kim. "Pengaruh Kepemilikan Investor Institusi Asing Terhadap Volatilitas Harga Saham di Indeks Kompas100." Owner 7, no. 2 (April 1, 2023): 1382–90. http://dx.doi.org/10.33395/owner.v7i2.1403.
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This journal investigates the effect of foreign institutional investor ownership on share price volatility with a sample of 207 companies between 2008 and 2021 that are included in the Kompas100 Index. The empirical results of this study indicate that foreign institutional investor ownership reduces share price volatility in Indonesia with control variables: market capitalization, turnover, leverage, and market to book. In addition, we also document the results of research that the greater the market capitalization of a company, the lower the volatility of its share price and foreign investors increase stock trading turnover in Indonesia because it attracts the attention of domestic investors, especially individual investors. Foreign institutional investors also prefer to invest in companies with a market to book rating that have a premium.
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Kang, Grace Il Joo, Yong Keun Yoo, and Seung Min Cha. "How Do Institutional Investors Interact With Sell-Side Analysts?" Journal of Applied Business Research (JABR) 34, no. 3 (May 7, 2018): 455–70. http://dx.doi.org/10.19030/jabr.v34i3.10169.
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This paper examines how institutional investors interact with sell-side analysts (hereafter, SSAs) in Korean stock market. In particular, we examine the role of institutional investors as a more sophisticated mechanism which incorporates sell-side analysts’ stock recommendation, target price, and earnings forecast more rapidly than individual investors do. Moreover, we examine whether institutional investors differentiate the quality of sell-side analysts’ information. By using a sample of 1,421 firm-year observations in Korean stock market during 2001–2011, we find that the change of institutional investor’s ownership has a significantly positive association with the level of equity value estimates based on SSAs’ earnings forecasts relative to stock prices and their stock recommendation which are considered as SSAs’ indicator of stock market’s mispricing. In addition, we find that only when SSAs provide more accurate earnings forecasts, institutional investors incorporate SSA’s information into their stock trading. Thus, we conclude that institutional investors in Korean stock market contribute to the enhancement of stock market efficiency by incorporating SSAs’ information into their stock trading more rapidly than individual investors. Our findings add to the literature by shedding a light on the unobserved interaction among more sophisticated stock market participants, such as institutional investors and sell-side analysts.
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Lin, Yuchen, Yangbo Song, and Jinsong Tan. "The governance role of institutional investors in information disclosure." Nankai Business Review International 8, no. 3 (August 7, 2017): 304–23. http://dx.doi.org/10.1108/nbri-01-2017-0005.
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Purpose As an important participant in capital market, institutional investors play a principal role in improving corporate governance. Most existing studies have focused on institutional ownership and its economic consequences. Nevertheless, they have not provided sufficient insight on the governance behavior of institutional investors as well as the underlying incentive mechanism. This paper aims to analyze the governance role of institutional investors in information disclosure and provide related evidence. Design/methodology/approach The authors propose a novel theory to analyze the institutional investors’ behavior of active governance and shows that such behavior significantly improves the quality of corporate information disclosure. The authors then conduct an empirical test by using the hand-collected data of institutional investors’ corporate visits during 2009-2014 in ChiNext. Findings This paper finds that the firms visited by institutional investors are more likely to have a greater tendency of disclosing more information than the firms that have never been visited. In particular, a higher frequency of visits or a larger number of participating institutional investors leads to a higher degree of disclosure. Consistent with the notion that on-site visits endow institutional investors with more frequent and active interaction with the firms, the authors find that the results are stronger for firms which are visited on-site, when compared with other information acquisition activities such as online meetings, conference calls and investor meetings. In addition, the effect of a site visit is greater when the site visit is conducted by securities companies or funds rather than insurance companies or QFIIs. Finally, the test of the direction of causality suggests that visits conducted by institutional investors leads to more information disclosure, rather than the reverse. Collectively, these results show that institutional investors’ participation enhances corporate information disclosure. Originality/value This paper explores the internal mechanism that institutional investors affect corporate governance by improving information disclosure through their corporate visits. This is the first study to investigate the influence of institutional investors’ corporate visits and their economic consequences.
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Chen, Ching-Lung, and Chung-Yu Chen. "Do Weak Internal Controls Affect Institutional Ownership Decisions?" Review of Pacific Basin Financial Markets and Policies 21, no. 03 (September 2018): 1850019. http://dx.doi.org/10.1142/s0219091518500194.
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Weak internal controls should increase risk perception among various contracting parties, e.g., institutional investors. This study examines whether the penalty firms pay for weak internal controls is associated with ownership decisions made by institutional investors in Taiwan and whether such decisions differ from those made by qualified foreign institutional investors (denoted as QFIIs) and local institutional investors. Empirical results indicate that weak internal controls are negatively associated with changes to institutional investor ownership, particularly for QFIIs. Further evidence shows that this negative association is more pronounced for firms with high divergence of control and cash-flow rights. This suggests that, faced with weak internal controls, institutions passively vote with their feet rather than actively monitor their portfolio firms. We demonstrate several diagnostic tests and show that the results are robust in various specifications.
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Woo, Mincheol, and Meong Ae Kim. "The Impact of Investor Type on Short Selling Performance: An Analysis of Individual Investors." Korean Journal of Financial Studies 52, no. 1 (February 28, 2023): 109–37. http://dx.doi.org/10.26845/kjfs.2023.2.52.1.109.
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Focusing on individual investors’ transactions, we investigated the features and performance of short selling exclusively executed by each investor type. The empirical results are as follows. First, individual investors are more active in exclusive trading than are other investor types, which is distinctive in the KOSDAQ (Korea Securities and Dealers Automated Quotations) market. Second, exclusive trading by individual investors showed losses in most periods after the trading date, regardless of the short selling weight. Exclusive trading by other types of investors showed profits in the groups of stock dates, even with lower short selling weights. Exclusive trading by individual investors showed profits only in the group with the highest past return, whereas exclusive trading by other types showed profits in the groups, even with negative past returns. Third, exclusive trading by individual investors showed a negative association with trading performance when the relationship was estimated from regressions. Trading executed by all investor types, or by both foreign and institutional investors, showed a positive association with performance. These results suggest that exclusive trading by individual investors is not based on information. Individual investors can be better off by selecting stock dates that both foreign and institutional investors short sell.
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Jain, Tanu, and Satyendra P. Singh. "Impact of Domestic Institutional Investors on Foreign Institutional Investors in India: An Analysis." Management Dynamics 19, no. 2 (April 21, 2022): 15–33. http://dx.doi.org/10.57198/2583-4932.1020.
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Lu, Chun, Jacqui Christensen, Janice Hollindale, and James Routledge. "The UK Stewardship Code and investee earnings quality." Accounting Research Journal 31, no. 3 (September 3, 2018): 388–404. http://dx.doi.org/10.1108/arj-09-2016-0116.
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Purpose The UK Stewardship Code was the first voluntary governance code specifically for institutional investors. The Code sets out the principles of effective stewardship by institutional investors toward their investee companies with the aim of improving long-term risk-adjusted returns to shareholders. This paper aims to examine whether compliance by institutional investors with UK Stewardship Code is related to the earnings quality of their investee companies. Design/methodology/approach The association between institutional investor Code compliance and Code compliance quality and investee company accruals quality is investigated. Findings For a sample of large UK listed companies from 2013, the authors find reasonably high levels of compliance with the Code by institutional investors. The analysis does not suggest that Code compliance is positively related to investee company earnings quality. Rather, the finding is that substantial or long-term investments are more likely to result in effective stewardship regardless of Code compliance. Originality/value This study offers valuable insights regarding the efficacy of the Stewardship Code’s policy approach to improving corporate governance by institutional investors.
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Zhao, Ruwei, Xiong Xiong, Dehua Shen, and Wei Zhang. "Investor Structure and Stock Price Crash Risk in a Continuous Double Auction Market: An Agent-Based Perspective." International Journal of Information Technology & Decision Making 18, no. 02 (March 2019): 695–715. http://dx.doi.org/10.1142/s0219622019500081.
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Multiple studies presume the institutional investors to be informed investors. However, some reports argue that this view is still under debate. In this paper, to avoid the informed investors proxy bias caused by the institutional investors, we construct an agent-based continuous double auction stock market model with both informed and uninformed investors and examine whether stock price crash risk can be affected by the change of investor structure. In particular, we employ four types of investor structures by gradually increasing percentage adjustments of informed investors from 20%, 40%, 60% to 80% within the market. We find that stock clear price and return show significant improved stability coming with the rising weight of informed investors. Beyond that, we recognize the situation that stock clear price falls below 95% confidence interval as crash event and count the number of the stock price crash events within each simulation of each different investor structure. We find that consistent with growing stability of stock clear price and return, stock price crash event number drops dramatically following the higher proportion of informed investors. These findings confirm our hypothesis that the involvement of informed investors contributes to the market stability.
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Astvansh, Vivek, Tao Chen, and Jimmy Chengyuan Qu. "The social cost of investor distraction: Evidence from institutional cross-blockholding." PLOS ONE 18, no. 12 (December 7, 2023): e0286336. http://dx.doi.org/10.1371/journal.pone.0286336.
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Institutional investors routinely hold blocks of stocks in multiple firms within an industry. While such cross-blockholding boosts a portfolio firm’s financial performance, could it distract investors from attending to firm activities in a nonfinancial domain, hurting its performance in that domain? The authors answer this question in the context of corporate social responsibility (CSR). They first document that cross-held firms perform worse on social responsibility than non-cross-held firms do. A quasi-natural experiment based on mergers between institutional blockholders helps establish causality. Next and as their primary contribution, the authors demonstrate investor distraction as the mechanism. Using two proxies of distraction—EDGAR search volume and shareholder proposals on socially responsible investment—they show that the negative impact of institutional cross-blockholding on CSR mainly comes from investor distraction when investors hold multiple blocks simultaneously. By highlighting the social cost of institutional cross-blockholding, this article finds a distraction effect of institutional cross-ownership, which extends our understanding of this unique ownership structure.
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Lee, Yen-Hsien, Wen-Chien Liu, and Chia-Lin Hsieh. "Informed Trading of Futures Markets During the Financial Crisis: Evidence from the VPIN." International Journal of Economics and Finance 9, no. 9 (August 10, 2017): 123. http://dx.doi.org/10.5539/ijef.v9n9p123.
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This paper examines the impact of informed trading on futures returns during the 2008-2009 financial crisis. To precisely capture the informed trading in the highly volatile market during this period, we adopt the Volume-Synchronized Probability of Informed Trading (VPIN) of Easley, Hvidkjaer and O’Hara (2012) as our main measurement for informed trading. Besides, we also use a unique transaction dataset with investor identity to classify investors into domestic and foreign institutional investors, which the foreign institutional investors are supposed to be characterized by a higher degree of informed trading. Our empirical results show that the VPIN of foreign institutional investors has indeed significantly positive impacts on futures returns at the individual level. By contrast, the effect of the VPIN of domestic institutional investors on futures returns is only significant on Wednesdays, which could be seen as a special kind of day-of-the-week effect.