Institutional Holdings Research Articles

Unlocking the Reversal Anomaly in the A-share Market: Insights from Marginal Funds of Institutional Investors

Fama's Efficient Market Hypothesis (1970) posits that all valuable information is swiftly reflected in stock prices in mature markets. However, anomalies like momentum and reversal effects persist in China's A-share market. This study investigated the short-term reversal effect using turnover rates and institutional investor marginal funds. Significant reversals were found in high-turnover stocks due to speculative trading and deviations from intrinsic value. Institutional investors played a crucial role in correcting mispricing. The Institutional Holding Change Ratio (IHCR) demonstrated that institutional investors' marginal funds strongly explain the reversal anomaly and act as a style factor with positive returns. This research highlights the impact of institutional and individual investor behaviors on market efficiency and investment strategies.

Ownership structure, board composition and CEO dominance: what does really matters to corporate deleveraging policies?

Purpose The role played by corporate governance mechanisms on corporate deleveraging policies has not been clarified. Empirical evidence is confined to developed economies, even with conflicting and inconclusive results. This paper aims to examine the role of corporate governance mechanisms, such as ownership structure, board composition and CEO dominance, in explaining corporate deleveraging policies. Design/methodology/approach Using a sample of listed Pakistani firms between 2010 and 2022, this study resorts to binary response models to examine the effects of governance mechanisms on firms’ decision to go debt-free. Findings A greater ownership concentration, institutional ownership and family ownership increase the propensity for zero leverage. Board gender diversity decreases the propensity for deleveraging policies, which seems to indicate that the presence of females reinforces the monitoring function of the board. Finally, lower managerial ownership or CEO dominance decreases the propensity toward zero leverage (interest convergence hypothesis), but higher managerial ownership or CEO dominance increases the propensity toward zero leverage (managerial entrenchment hypothesis). Practical implications Risk-averse managers who prefer to control a firm using little or no debt will find it easier to implement these financing policies in firms with greater ownership concentration and where institutional holders have a substantial stake. For shareholders, this study suggests that investing in firms with females on board reduces the risk of corporate deleveraging policies being adopted for entrenched reasons. Social implications The presence of females on board seems to decrease the propensity of managers to adopt opportunistic actions and may also contribute to enhancing human welfare and society in developing countries. Originality/value To the best of the authors’ knowledge, this is the first study considering the effect of board diversity on zero leverage. Another singularity is that this study exhibits a nonlinear relationship between managerial ownership and corporate deleveraging policy.

The COVID-19 Effect of Institutional Holdings on Firm Profitability: An Industry Analysis

We investigate the effect of institutional holdings change on firm value change one year before and after the COVID-19 pandemic for US and global industry. Using the firm value change measures of return on equity or economic value-added changes, we find a positive relationship between institutional holdings change and firm value change one year after the COVID-19 pandemic. Specifically, the positive relationship is more pronounced for global industry. The result implies that the positive effect of institutional holdings on firm value still holds one year after the COVID-19 pandemic. It implies the global industry is more sensitive to institutional holdings.

‘Counting fry under a waterfall’: the history, development, and current use of the Small Press Collections at University College London

ABSTRACT University College London Special Collections holds the Small Press Collections consisting of the Little Magazines, Alternative Presses, and Poetry Store of poetry pamphlets, artist’s books, and other text bearing print objects. This essay outlines the history and growth of the collections, founded by Geoffrey Soar in 1964, and starts by exploring the networks essential to the development of a large collection of international, independently published literary and visual art material. I draw on fifteen years’ experience as Collection Manager to examine the challenges of acquiring, cataloguing, and managing non-mainstream, self-published, ephemeral material in an institutional context and facilitating access for researchers. It considers selected comparable collections in the UK and the US and the difficulties in aligning institutional holdings and practices. The notions of materiality and obsolescence in the context of library collections are considered in relation to mimeographed and other format little magazines and small press publications. It concludes with examples of object-based learning scenarios that reactivate the material in a teaching and research context.

The Impact of Mandatory Operating Information Disclosure on Related‐Party Transactions: Evidence From China

The Impact of Mandatory Operating Information Disclosure on Related‐Party Transactions: Evidence From China

The role of ESG scores in ESG fund performance and institutional investor selection

This paper conducts a study on ESG funds between 2012 and 2022 to analyze the impact of ESG fund performance indicators on their institutional ownership ratios. The findings show that the performance of ESG funds is positively correlated with the proportion of institutional holdings. External institutional investors tend to be more inclined to hold funds with excellent historical performance, while fund management companies are more inclined to hold funds with poorer historical performance. In addition, fund management companies are more inclined to hold funds with high ESG scores.

Green-selecting: Foreign institutional ownership and corporate green practices

To address the widespread skepticism of firms’ environmental commitments, we show that foreign institutional ownership can positively predict the holding firm's real green practices. Exploiting the Stock Connect Programs in China which introduces the minority ownership of foreign institutions, we show that the selected firms significantly increase holdings of green patents, R&D expenses, access to green credits, and decrease carbon emissions. The effect is more pronounced if the foreign institutional investors are from countries with higher ESG standards. Analysis based on propensity-score-matched sample suggests that foreign institutional ownership sends a signal certifying the firm's green orientation, enabling it to access more capital and improve green performance. Overall, our study proposes foreign institutional holdings as a practical indicator of selecting genuinely green stocks.

Capital market internationalization and firms' ESG performance: Evidence from the inclusion of China A-shares in the MSCI Emerging Market Index

This paper explores the impact of capital market internationalization on firms' ESG performance, utilizing the event that China A-shares were officially included in the MSCI Emerging Market Index. Using a sample of A-share non-financial listed companies, we find strong evidence that the ESG performance of companies included in the MSCI Emerging Market Index has been significantly improved. This finding remains robust after several robustness checks and the adoption of instrumental variables to circumvent endogeneity issues. Heterogeneity analysis shows that this effect is only significant for non-state-owned firms, firms located in provinces with higher levels of marketization, and firms in eastern cities. Further analysis verifies that the inclusion of China A-shares in the MSCI Emerging Market Index promotes firms' ESG performance by promoting institutional holdings and enhancing external supervision. Our findings shed light on the possible impact of capital market internationalization on corporate behavior in emerging markets.

Does mandatory expenditure on CSR affect firm value? Empirical evidence from Indian firms

PurposeThe purpose of this study is to examine the impact of mandatory corporate social responsibility (CSR) spending on firm value in the Indian context.Design/methodology/approachUsing firm-level data over the period 2012–2017, this study uses the difference-in-differences (DID) technique combined with matching to control for potential endogeneity of the decision to comply with the CSR Act since the Act in its current form is applicable as a comply-or-explain obligation.FindingsThe results of this study suggest that mandatory CSR spending has a positive and statistically significant impact on firm value. These results remain robust to alternative econometric techniques such as regression discontinuity design (RDD) and randomization inference test as well as to alternative empirical specifications. Furthermore, the study demonstrates that the positive effect of CSR spending on firm value is more pronounced for firms with higher information asymmetry problem and lower institutional holdings.Originality/valueThis study explicitly considers the “comply-or-explain” flexibility option, in terms of spending on CSR, provided to Indian firms for the initial two to three years and investigates whether spending on CSR helps firms enhance their firm value. The study also finds that the positive effect of CSR spending on firm value is more pronounced for firms with higher information asymmetry problems and lower institutional holdings.

Is more always better? Information acquisition and stock price crash risk

We posit that high search intensity on a firm's SEC filings creates capital market pressure on managers to withhold bad news. Using the count of non-robot EDGAR downloads of SEC filings as a proxy for search intensity, we find that high search intensity is related to higher future crash risk. The result is cross-sectionally stronger for firms with higher transient institutional holdings, overconfident CEOs, and more intangibles. Our findings are robust to different measures of crash risk and bad news hoarding. Overall, we highlight one unintended capital market consequence associated with the high intensity of information acquisition.

Does institutional holders’ approval really matter? An examination of Israel’s binding vote on CEO compensation, from directors’ point of view

This study examines the implications of mandatory shareholder approval for chief executive officer (CEO) compensation in Israel, following the “say-on-pay” (SOP) framework. Through the utilization of a binding voting framework, shareholders evaluate the effectiveness of CEO compensation structures. A survey involving 106 Israeli directors occupying diverse board positions, including external, independent, regular, and chair positions, reveals that external directors demonstrate a greater appreciation for institutional votes. This highlights their acknowledgment of institutional perspectives and underscores the critical significance of fostering effective communication between boards and institutional stakeholders to strengthen corporate governance frameworks. The study emphasizes the pivotal role of dialogue in enhancing governance structures through a nuanced examination of challenges in executive compensation governance

The Relationship between Promoters’ Holdings, Institutional Holdings, Dividend Payout Ratio and Firm Value: The Firm Age and Size as Moderators

The present paper aims to empirically examine the effect of promoters’ holdings and institutional holdings on dividend payout ratio and the firm value. Most importantly, this paper explores the age and size of the firm as the moderators in the relationships. Data collected from 23 companies from India and 253 data points were analyzed to test the hypothesized relationships. The results indicate that promoters’ holdings and institutional holdings are positively associated with dividend payout ratio and firm value. Further, moderator hypotheses suggest that (i) firm age moderates the relationship between promoters’ holdings and dividend payout ratio, (ii) firm size moderates the relationship between institutional holdings and dividend payout ratio, (iii) firm age moderates the relationship between promoters’ holdings and firm value, and (iv) firm size moderates the relationship between institutional holdings and firm value. The implications for theory and practice are discussed. The conceptual model developed and tested in this research contributes to both the literature on dividend payout ratio and firm value and to the needs of institutional investors interested in increasing the firm value.

Institutional ownership and stock return volatility during the COVID-19 crisis: An international evidence

Using a sample of 39 countries from 2010 through 2021, we find that while institutional holdings have the stabilizing effect during the normal (non-crisis) period, they appear to move stock prices away from fundamentals during the COVID-19 crisis. Furthermore, the impact of foreign and domestic institutions is not homogenous. We also find that institutional investors help reduce stock return volatility in countries more strongly affected by the COVID-19 crisis. Finally, our results indicate that investor protection moderates the impact of institutional holdings on stock return volatility in both pre- and crisis periods.

Attracting institutional investments to emerging markets: The case of Turkiye

AbstractUnderstanding institutional investors' investment criteria in emerging markets is essential because they typically make large investments without control rights or protection of the rule of law. This study undertakes an investment criteria investigation of institutional investors in Turkiye. The sample covers real and financial sector companies to investigate sectoral differences in Borsa Istanbul‐listed firms for 2010–2021. Using a panel data approach, we show that the presence of growth options, generous payout policy, attractive firm valuation, and quality of the external governance mechanisms are important factors in attracting institutional investors by real sector firms. Only a large firm size and the quality of the external governance mechanisms arise as important factors for financial sector firms. Moreover, institutional holdings positively impact the percentage shares of institutional investors during crisis periods among real sector firms, whereas they do not affect financial sector firms. Real‐sector and financial‐sector firms can use our findings to increase institutional ownership. Our results have important implications for institutional investors, individual investors, and market regulators to demand critical corporate governance practices.

Does Environmental, Social and Governance Performance Lessen Analyst Optimistic Bias: Evidence from China*

AbstractWe examine how analysts respond to non‐financial information about environmental, social responsibility, and corporate governance (ESG) performance and find good ESG performance lessens analysts' optimistic bias. We verify the mediating role of financial transparency that superior ESG performance decreases the level of information asymmetry between firms and analysts and improves financial transparency, thus weakening optimistic bias. Analysts' optimistic bias rises with increased institutional holdings and diminishes with heightened economic policy uncertainty. Social responsibility makes a larger reducing effect on analyst optimistic bias than corporate governance and environmental protection. Our findings have important implications for encouraging firms to emphasize ESG performance and improving stock market efficiency.

Analysts’ Institutional Client Catering and Reputation Tradeoff: Strategic Timing of Recommendations

We examine whether sell-side analysts strategically time their favorable recommendations to cater to institutional investors while preserving analysts’ reputational capital. Although prior literature documents that analysts provide more positive recommendations for stocks that are part of their institutional clients’ (specifically, mutual funds’) portfolios, it does not explicitly address a reputation cost associated with such practice. Using a sample of analysts’ recommendations on U.S. firms for the 2002–2017 period, we document a pattern of analysts’ recommendations being more optimistic in the end month of a quarter and less optimistic in the beginning month of a quarter. This timing pattern ties to quarterly reporting periods of portfolio managers, with actively managed mutual funds’ holdings being affected the most. Analysts with Institutional Investor All-Star ranking do not engage in such stock recommendation timing practices. The market participants seem to believe rosy recommendations issued for stocks with more institutional holdings in the end month of a quarter with more positive cumulative abnormal returns to upgrade and downgrade recommendations. JEL classifications: G14, G24

The Impacts of Executive Equity on Green Corporate Innovation

Executive stock incentives, as an important tool for attracting talent and achieving long-term development goals, have a profound impact on the development of green innovation in enterprises. Based on this, this article uses data from Chinese listed companies from 2007 to 2020 and employs a two-way fixed effects model and a two-stage least squares method to explore the impact of executive stock incentives on green innovation in China. The study found that executive stock incentives have a significant positive impact on green innovation in enterprises. This promotional effect is more pronounced in non-state-owned enterprise groups characterized by operating losses, reduced institutional holdings, and fewer negative media reports. Mechanism analysis suggests that increasing the intensity of executive stock incentives can enhance profitability, increase tolerance for failure, and promote increased investment in green innovation. Finally, based on the conclusions, relevant policy implications are drawn.

Relationship between return on assets and firm value: institutional holdings and firm size as moderators

Relationship between return on assets and firm value: institutional holdings and firm size as moderators

Mechanisms Underlying Geopolitical Shocks and Stock Price Crash Risk: Evidence from China

ABSTRACT Geopolitical uncertainty imposes a significant impact on stock prices in the stock market. We construct dynamic estimations of geopolitical risk exposure of individual stocks listed in China and examine the relationship between individual geopolitical risk and future stock price crash risk. Our results show that geopolitical risk is a more prominent macro factor than economic policy uncertainty measure that affects stock price crash risk. Investigating the underlying mechanism, we find that firms with highly synchronized stock prices, low analyst coverage ratio, low institutional holdings, and large investor heterogeneity tend to be affected more by geopolitical shocks, leading to future stock price crashes. This study shows the importance of promoting efficient information transmission system and improving corporate governance.

Corporate going-concern report in early pandemic situation: Evidence from Indonesia

A going-concern report (GCr) in the audit opinion adds value and ensures that the firm's sustainability is secured. This study sheds light on this relationship of listed infrastructure, utility, and transportation firms in Indonesia as the most affected firms by Covid-19. Data were collected from published audited annual reports and extracted from 73 firms as a sample. Logistic regression was employed to test the hypotheses. The results show the importance of leverage, audit quality, prior opinions, and dividend policy in ensuring corporate GC. In contrast, audit committee and institutional holder as corporate governance indicators are unrelated to GCr. Beyond its contribution to the literature, this study offers valuable feedback for regulatory bodies to consider the enforcement of corporate governance implementation and assists investors in making better-informed decisions. Furthermore, due to a pandemic crisis, a postponed dividend payment has not caused the firm to accept a GCr.