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Institutional Investor Horizon And Firm Valuation Around The World
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Book Synopsis Institutional Investor Horizon and Firm Valuation Around the World by : Simon Döring
Download or read book Institutional Investor Horizon and Firm Valuation Around the World written by Simon Döring and published by . This book was released on 2020 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a comprehensive dataset of firms from 34 countries, we study the effect of institutional investors' investment horizons on firm valuation around the world. We find a positive relation between institutional ownership and firm value that is driven by short-horizon institutional investors. Accounting for the interaction between investors' investment horizon and nationality, we show that foreign short-horizon institutions, which are more likely to discipline managers through the threat of exit rather than engaging in monitoring made costly by the liability of foreignness, are the investor group with the strongest effect on firm value. Reinforcing the threat of exit channel, we find that the value-enhancing effect of short-horizon investors is stronger in the presence of multiple short-horizon investors, who are more likely to engage in competitive trading. The positive valuation effect of short-horizon investors is stronger when stock liquidity is high, which makes the exit threat more credible, and in firms prone to free cash flows agency problems. Overall, our results are consistent with short-horizon institutional investors, especially foreign institutional owners, affecting firm value by disciplining managers through credible threats of exit.
Book Synopsis Institutional Investors In Global Capital Markets by : Narjess Boubakri
Download or read book Institutional Investors In Global Capital Markets written by Narjess Boubakri and published by Emerald Group Publishing. This book was released on 2011-09-27 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Examines various issues concerning the strategies of institutional investors, the role of institutional investors in corporate governance, their impact on local and international capital markets, as well as the emergence of sovereign and other asset management funds and their interactions with micro and macro economic and market environments.
Book Synopsis Cross-Country Determinants of Institutional Investors' Investment Horizons by : Simon Döring
Download or read book Cross-Country Determinants of Institutional Investors' Investment Horizons written by Simon Döring and published by . This book was released on 2020 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a large dataset of firms from 35 countries, we study the country-level determinants of institu-tional investors' investment horizons around the world. We document that an equity investor-friendly institutional environment is more important for long-term investors, while short-term investors seem to be less concerned about the quality of the financial and legal environment. Beyond the financial and legal structure, the cultural environment and economic policy uncertainty in a country are other important determinants of investor horizons. These findings improve our understanding of cross-country differences in the corporate governance role, i.e., engagement vs. exit, of institutional inves-tors.
Book Synopsis ESG and Responsible Institutional Investing Around the World: A Critical Review by : Pedro Matos
Download or read book ESG and Responsible Institutional Investing Around the World: A Critical Review written by Pedro Matos and published by CFA Institute Research Foundation. This book was released on 2020-05-29 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: This survey examines the vibrant academic literature on environmental, social, and governance (ESG) investing. While there is no consensus on the exact list of ESG issues, responsible investors increasingly assess stocks in their portfolios based on nonfinancial data on environmental impact (e.g., carbon emissions), social impact (e.g., employee satisfaction), and governance attributes (e.g., board structure). The objective is to reduce exposure to investments that pose greater ESG risks or to influence companies to become more sustainable. One active area of research at present involves assessing portfolio risk exposure to climate change. This literature review focuses on institutional investors, which have grown in importance such that they have now become the largest holders of shares in public companies globally. Historically, institutional investors tended to concentrate their ESG efforts mostly on corporate governance (the “G” in ESG). These efforts included seeking to eliminate provisions that restrict shareholder rights and enhance managerial power, such as staggered boards, supermajority rules, golden parachutes, and poison pills. Highlights from this section: · There is no consensus on the exact list of ESG issues and their materiality. · The ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” · Investors should be positioning themselves for increased regulation, with the regulatory agenda being more ambitious in the European Union than in the United States. Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals. CFA Institute provides an exemplary case in its Future of Finance series (www.cfainstitute.org/research/future-finance). For the academic community, I suggest we ramp up research aimed at tackling some of the open questions around the pressing societal goals of ESG investing. I am optimistic that practitioners and academics will identify meaningful ways to better harness the power of global financial markets for addressing the pressing ESG issues facing our society.
Book Synopsis Investor Engagement by : Roderick Martin
Download or read book Investor Engagement written by Roderick Martin and published by OUP Oxford. This book was released on 2007-07-05 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: The growth of shareholder value has been a major change in Western economies since the 1980s. This growth has reignited debates concerning relations between investors and managers. This book argues that investors are more than passive providers of finance, on whose behalf managers seek to maximize shareholder returns. Instead, many investors directly influence management practice, through investor engagement. The book examines the role of institutional investors and private equity firms, two types of investors with overlapping but different reasons for engagement. Questions addressed include: What are the incentives, and disincentives, for investment engagement? How is investor engagement organized? What areas of management practice are of particular concern to investors? The discussion shows in detail how private equity firms play a major role in developing new companies, beyond the provision of finance, especially in the IT, biotechnology, and pharmaceutical sectors. The discussion is primarily based on British and US research. The debate has wider international relevance, because there are strong pressures for establishing shareholder value as the international 'norm' for systems of corporate governance. Following a detailed discussion of Germany, the authors conclude that there is no inevitable trend to shareholder value: shareholder value depends upon complementary institutional arrangements in national business systems, which are far from universal. The book concludes with a critical analysis of the justifications for shareholder value and investor engagement, highlighting the weaknesses of both efficiency and equity justifications.
Book Synopsis Institutional Investors and Firm Valuation by : Maria De-La-Hoz
Download or read book Institutional Investors and Firm Valuation written by Maria De-La-Hoz and published by . This book was released on 2015 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article analyses how the corporate valuation of Latin American firms is affected by the presence of an institutional blockholder investor. The study uses a data set of 562 firms from six Latin American countries for the period 1997 to 2011. As in similar studies, we found that the presence of an institutional investor has a positive effect of 8% on firm value. After dividing the sample by investor type, we found that the presence of a grey investor (pension funds and insurance companies) has a negative effect on firm valuation, while independent investors (banks, investment and mutual funds) have a positive effect on firm valuation. This is one of the first studies to evaluate the relationship between investor activism and corporate valuation in Latin American economies with the most significant capital market development.
Book Synopsis Institutional Investors and Corporate Governance by : Amil Dasgupta
Download or read book Institutional Investors and Corporate Governance written by Amil Dasgupta and published by . This book was released on 2021-09-20 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph provides a comprehensive overview of the role of institutional investors in corporate governance. There are three main components: 1) tracing the emergence of institutional investors as the modal concentrated owners of public firms in modern economies; 2) providing a detailed characterization of key aspects of the legal and regulatory setting within which institutional investors operate with respect to the governance of their portfolio firms; and 3) synthesizing the evolving academic literature in finance to the emergence of institutional investors in corporate governance and linking theoretical predictions to empirical findings. Following an introduction, section 2 provides a series of new stylized facts on the evolution of institutional ownership and its heterogeneity in the US and outside of the US. Section 3 describes the legal and regulatory environment within which institutional investors operate, with a focus on the obligations, ability, and incentives of such investors to engage in the corporate governance of firms. Section 4 reviews the theoretical literature on institutional investors and corporate governance while Section 5 discusses the empirical literature. Section 6 provides conclusions.
Book Synopsis Institutional Investor Heterogeneity and Firm Valuation by : Maria De-La-Hoz
Download or read book Institutional Investor Heterogeneity and Firm Valuation written by Maria De-La-Hoz and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article analyses how the corporate valuation of Latin American firms is affected by the presence of a blockholder institutional investor. The study uses a data set of 562 firms from six Latin American countries for the 1997-2011 period. We found that the presence of an institutional investor has a positive effect of 8% on firm value, which increases to 21% for the cases where there is blockholder coalition with an institutional investor. After dividing the sample by investor type, we found that independent institutional ownership implies a positive premium on firms' Tobin's Q, while the presence of a grey investor has a negative effect on firm valuation.
Book Synopsis The Effects of Institutional Investor Objectives on Firm Valuation and Governance by : Paul Borochin
Download or read book The Effects of Institutional Investor Objectives on Firm Valuation and Governance written by Paul Borochin and published by . This book was released on 2016 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find that ownership by different types of institutional investors has varying implications for future firm misvaluation and governance characteristics. Dedicated institutional investors decrease future firm misvaluation, in both direction and magnitude, relative to fundamentals. In contrast, transient institutional investors have the opposite effect. Using SEC Regulation FD as an exogenous shock to information dissemination, we find evidence consistent with dedicated institutions having an information advantage. Similarly, dedicated investors are associated with better future governance characteristics, while transient investors are not. The valuation effects are primarily driven by institutional portfolio concentration while the governance effects are driven by portfolio turnover. These results imply a more nuanced relationship between institutional ownership and firm value and corporate governance.
Book Synopsis Bovernance and Bank Valuation by : Gerard Caprio
Download or read book Bovernance and Bank Valuation written by Gerard Caprio and published by World Bank Publications. This book was released on 2003 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Which public policies and ownership structures enhance the governance of banks? This paper constructs a new database on the ownership of banks internationally and then assesses the ramifications of ownership, shareholder protection laws, and supervisory/regulatory policies on bank valuations. Except in a few countries with very strong shareholder protection laws, banks are not widely held, but rather families or the State tend to control banks. We find that (i) larger cash flow rights by the controlling owner boosts valuations, (ii) stronger shareholder protection laws increase valuations, and (iii) greater cash flow rights mitigate the adverse effects of weak shareholder protection laws on bank valuations. These results are consistent with the views that expropriation of minority shareholders is important internationally, that laws can restrain this expropriation, and concentrated cash flow rights represent an important mechanism for governing banks. Finally, the evidence does not support the view that empowering official supervisory and regulatory agencies will increase the market valuation of banks"--NBER website
Book Synopsis Institutional Investors in Global Markets by : Gordon L. Clark
Download or read book Institutional Investors in Global Markets written by Gordon L. Clark and published by Oxford University Press. This book was released on 2017 with total page 275 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is about what institutional investors do, how they do it, and when and where they do it; it is about the production of investment returns in the global economy. Being a book about the production process, it also tackles some of the key issues found in the academic literature on the theory of the firm.
Download or read book Payout Policy written by and published by . This book was released on 2007 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividend policy continues to be among the premier unsolved puzzles in finance. A number of theories have been advanced to explain dividend policy. This e-book briefly reviews the principal theories of payout policy and dividend policy and summarizes the empirical evidence on these theories. Empirical evidence is equivocal and the search for new explanation for dividends continues.
Book Synopsis The Influence of Institutional Investors on Firm Value by : Yong Seung Lee
Download or read book The Influence of Institutional Investors on Firm Value written by Yong Seung Lee and published by . This book was released on 2013 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: The impact of corporate governance on firm value has been extensively debated by academics and business practitioners. Some studies show that companies that allow minority shareholders to have more control are likely to create greater shareholder value than those firms with concentrated control, while other studies suggest that the impact of having democratic governance is either negligible or even negative. In developed countries institutional investors have a significant stake in most of the companies. Active engagement by institutional investors is expected to decrease agency costs by strengthening monitoring mechanisms of operations and performance evaluations of the management, resulting in an increase in firm value. However, some academics and business practitioners argue that such minority shareholders' active engagement could be detrimental to firm value. In this thesis, I study the influence of institutional investors' active shareholder engagement on firm value and the relationship between the characteristics of corporate governance and firm value of target companies. I review previous studies that have evaluated both the effect of corporate governance and of institutional investors' activism on firm value. I conduct empirical analyses to examine the relationship between the institutions' shareholder engagement and firm value.
Book Synopsis The Colors of Investors' Money by : Miguel A. Ferreira
Download or read book The Colors of Investors' Money written by Miguel A. Ferreira and published by . This book was released on 2007 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the role of institutional investors around the world using a comprehensive data set of equity holdings from 27 countries. Domestic, U.S.-, and non-U.S.-based foreign institutions hold comparable shares of non-U.S. corporations. We find that all institutional investors have a strong preference for the stock of large firms and firms with strong governance indicators, while foreign institutions tend to overweight firms that are cross-listed in the U.S. and members of the Morgan Stanley Capital International World Index. We find that firms with higher ownership by foreign and independent institutions (unlike other institutions) have higher firm valuations, better operating performance, and lower capital expenditures. Our results indicate that foreign and independent institutions, with potentially fewer business ties to firms and freer from management influence, are involved in monitoring corporations worldwide.
Book Synopsis Portfolio Preferences of Foreign Institutional Investors by : Reena Aggarwal
Download or read book Portfolio Preferences of Foreign Institutional Investors written by Reena Aggarwal and published by World Bank Publications. This book was released on 2003 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Three Essays on Institutional Investors by : Ligang Zhong
Download or read book Three Essays on Institutional Investors written by Ligang Zhong and published by . This book was released on 2012 with total page 436 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I investigate the impact of institutional investors on security prices and corporate policies, and offer a new perspective on the vital role that institutional investors play in the modern capital market. Specifically, on the impact on security price movements, I design a new measure of stock-level sentiment based on mutual fund publically disclosed portfolio information and provide a new dimension to better predict stock returns. A trading strategy based on the new sentiment metrics can generate an annualized alpha of 21.27%. The abnormal returns cannot be explained by the time-varying expected returns and transaction costs, and can be best explained by mutual fund overreactions. Hence, my findings can be interpreted as a new anomaly in a new era-when institutional investors are the marginal traders. On the impact on corporate policy side, I document two pieces of new empirical evidence on the importance of long-term institutional holdings: the entrenchment effect of long-term institutional holdings in the context of corporate financing decisions and the active monitoring role of long-term institutional investors in the context of international firms' accounting qualities. Combined with previous studies which favour a long-term institutional investor, the evidence on the cost side of long-term holding I document here can serve as the first call for an optimal investment horizon for firms operating in the U.S.
Book Synopsis Institutional Investors Networks and Firm Value by : Emanuele Bajo
Download or read book Institutional Investors Networks and Firm Value written by Emanuele Bajo and published by . This book was released on 2017 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the role of institutional investor networks on firm value. Using US data over the period 2001-2013, we document that block-holdings from more central institutional investors (i.e. with larger co-ownership ties) enhance firm value more than those held by other investors. Our findings are consistent with the view that central institutional investors provide a certification benefit to the firm. On the opposite, we do not find evidence that the increase in value is due to monitoring, advisory, or information cost effects. The documented effects are robust to alternative specifications of network centrality and to endogeneity concerns.
