Abstract
This paper examines whether and how institutional investment horizon influences corporate financing decisions. Consistent with our predictions, we find that longer institutional investment horizon is negatively associated with the likelihood that a firm issues equity and debt, and with the amount of security issuance. Our results also indicate that firms with longer investment horizon prefer debt to equity. We also document that debt maturity decreases with the level of ownership by long-term institutional investors. In addition, we show that firms with long-term institutional investors adjust their capital structure at a slower pace.
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