Institutional Stock Ownership Research Articles

On “Innovation and institutional ownership”

In their article “Innovation and Institutional Ownership”, Aghion, Van Reenen and Zingales (2013) find that the rise in institutional stock ownership in the U.S. during the 1990s led to an increase in corporate innovation, as measured by patent and patent citation counts. Their article concludes that “contrary to the view that institutional ownership induces a short-term focus in managers, we find that their presence boosts innovation” (p. 302). Subsequent research has generally accepted this finding at face value. However, we uncover several critical issues with their data. Addressing these issues renders the results economically and statistically insignificant and, in some instances, even suggests a negative relationship between institutional ownership and U.S. innovation.

Bond Market Transparency and Stock Price Crash Risk: Evidence from a Natural Experiment

ABSTRACT Utilizing the Trade Reporting and Compliance Engine (TRACE) setting as an exogenous shock to bond market transparency, we find that improved bond market transparency leads to lower crash risk in the stock market, consistent with increased information spillover from the bond market into the stock market. Results from the Path analysis suggest that bond market transparency affects stock price crash risk not only directly, but also indirectly through its effects on management guidance, analyst forecasts, and media reports. We also find that the mitigation effect of bond market transparency on stock price crash risk is more pronounced for firms with higher default risk bonds, lower institutional stock ownership, and more opaque financial reporting. Overall, our findings suggest that increased bond market transparency following TRACE generates a positive externality in reducing crash risk in the stock market. JEL Classifications: D83; G14; G24.

THE Effect of Managerial Ownership, Institutional Ownership, Debt Policy, Profitability and Company Size on Devidend Policy on Hospital and Tourism Service Companies Listed on The Indonesia Stock Exchange

This study aims to determine and analyze the Effect of Managerial Ownership, Institutional Ownership, Debt Policy, Profitability, and Company Size on Policy Dividends on Hospitality and Tourism Service companies listed on the Indonesia Stock Exchange. The research period 2017-2020, there are 15 companies. This type of research is causal associative. The population in this study is a hotel and tourism service company listed on the Indonesia Stock Exchange. The sampling method is census, so the number of samples used is 60 research sample data. Methods of data analysis using views 10 . The results show that institutional stock ownership, profitability and company size have a significant effect on dividend policy, while managerial ownership and debt policy have no effect on dividend policy in hospitality and tourism service companies listed on the Indonesia Stock Exchange.

How do insider trading incentives shape nonfinancial disclosures? Evidence from product and business expansion disclosures

Nonfinancial disclosures of product and business expansion planning occur frequently in practice and are an important vehicle by which managers convey corporate information to outsiders. However, little is known about how the opportunistic incentives of managers affect the choice of such nonfinancial disclosures. This study examines whether managers make their nonfinancial disclosures strategically for self-serving trading incentives. I find strong and robust evidence to suggest that managers manipulate the timing and selectivity of their nonfinancial disclosures in an attempt to maximize trading profits. Specifically, managers tend to disclose bad (good) news on products or business expansion before purchasing (selling) shares. I also find that such strategic behavior is more evident when the expected price impact of the disclosures is greater and when the CEOs are more powerful. However, I do not find evidence that the strategic behavior is weaker for firms with high institutional stock ownership. Overall, my results contribute to understanding managers’ strategic use of nonfinancial disclosures in fulfilling personal trading incentives, and should be of interest to boards of directors charged with the responsibility of monitoring and restricting opportunistic managerial disclosures and insider trades.

Positive Accounting Theory In Predicting Accounting Choice (An Overview Of Adopted IFRS In PSAK 16 Research On The Audited Financial Statements)

Background of this study is the implementation of IFRS di Indonesia which is implemented since 2008. One of PSAK that have been adopted was PSAK 16. This PSAK was permited entity to choose one of the method of fair value or historical cost to measure the property, plant and equipment. The purpose of this study is to test if The Positive Accounting Theory can predict choices of fair value method or historical cost method . This study observed 52 financial statement of company that listed on BEI at 2009. Dependent variable that used in this study was firm size, institutional stock ownership, leverage, and industrial membership. Result of the study shows that the fourth variable wasn’t have significant result in explaining The PAT predicting accounting choice of those methods of property, plant and equipment measurement

Determinats of Profitability and Implications on Corporate Value

This study aims to prove empirically the determinants of profitability and their implications for firm value in manufacturing companies listed on the Indonesia Stock Exchange during the 2015-2019 period by using a panel data regression model with 25 manufacturing companies as the research sample. Based on the empirical results, the influencing variables positive and significant impact on profitability is Managerial Share Ownership, Audit Committee Effectiveness, Corporate Social Responsibility, company size. and variables that do not have a significant effect are institutional stock ownership and the Debt To Equity Ratio. positively and significantly. Individual companies are affected by profitability; The biggest positive influence is the company Japfa Comfeed Indonesia Tbk, the smallest positive is the Lion Metal Work Tbk company, and the biggest negative influence is the Bata Shoe Company Tbk, the smallest negative is the company Holcim Indonesia Tbk. The results of this study have implications for firm value (Tobins Q); The variables that show a positive and significant influence are the variable of Audit Committee Effectiveness, Corporate Social Responsibility, Company Size, and Debt To Equity Ratio, Return on Asset variables that have no effect are Institutional Share Ownership, Managerial Share Ownership. the biggest positive influence on changes (Tobins Q) of the company Japfa Comfeed Indonesia Tbk. the smallest positive is the company Semen Batu Raja Tbk, the biggest negative influence is the Company Tempo Scan Pacific Tbk; The smallest negative influence is the company Holcim Indonesia Tbk.

CEO Regulatory Focus and Strategic Change: The Importance of Context

This research extends upper echelons theory by exploring the impact of CEO personality factors, specifically regulatory focus, within various contexts. Findings reveal that CEO regulatory focus can influence firm strategic change, but only in consideration of specific contexts. Firm performance prior to a new CEO taking office, new CEO status, ongoing CEO tenure, and institutional stock ownership all have a moderating effect on the relationship between CEO regulatory focus and firm strategic change. We test our hypotheses using a panel dataset of 531 public firms. These results provide insight for CEOs, boards of directors, and other stakeholders who are impacted by CEO decision making.

Institutional stock ownership and firm innovation: Evidence from China

This paper investigates different institutions’ ability to influence firm innovation in the largest emerging market, China. We show that mutual funds’ holdings significantly increase firm innovation, but grey institutional holdings (including insurance companies and pension funds) and Qualified Foreign Institutional Investor (QFII) holdings have less or no significant impact on innovations. We suggest this is due to the high equity holdings and less business connections of mutual funds on (with) portfolio firms in comparison with other institutional investors. Our results are robust after applying different measures of firm innovation and controlling for possible endogeneity. This study sheds new light on the effect of different institutional ownerships on firm innovation in emerging economies. Our results provide further evidence that in comparison with more developed markets, institutional investors in emerging markets can govern invested firms through “threat of exit” even when holding a small proportion of shares in the firms.

With Power Comes Responsibility: How Powerful Marketing Departments Can Help Prevent Myopic Management

Firms sometimes engage in myopic management (e.g., cutting marketing spending, providing lenient credit to customers to improve short-term results). Although marketing is at the center of such myopic management, there are few insights on whether a marketing department could prevent it. To address this gap, the authors examine the role of powerful marketing departments in preventing myopic marketing spending and revenue management. They hypothesize that there are internal and external enablers of marketing department power (i.e., a chief executive officer with marketing experience, the firm’s power over its customers, analyst coverage, and institutional stock ownership) that help a powerful marketing department prevent myopic management. They test the hypotheses using a panel of 781 publicly listed U.S. firms between 2000 and 2015. As hypothesized, when the firm has (1) a chief executive officer with a marketing background and (2) power over its customers, increasing marketing department power decreases the likelihood of both myopic marketing spending and myopic revenue management; increasing marketing department power and analyst coverage decreases the likelihood of myopic marketing spending. The findings highlight powerful marketing leadership as a hitherto overlooked way to prevent myopic management and improve firm performance.

PENGARUH INDEPENDENSI, MEKANISME CORPORATE GOVERNANCE DAN KUALITAS AUDIT TERHADAP INTEGRITAS LAPORAN KEUANGAN (Studi Empiris Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia Periode 2011 – 2015)

This research aimed to empirically analyze the effect of independence, corporate governance mechanisms (stock institutional ownership percentage, the percentage of stock ownership management, audit committees, independent directors) and quality audit of the integrity of financial report. The population in this research are all manufacturing companies listed on the Indonesia Stock Exchange (IDX) over the period 2011-2015. The sample used in this research are 39 companies to obtain a sample of 195 observation data using purposive sampling. The conclusion is there is no significant effect between independence, percentage of institutional stock ownership, percentage of stock ownership management, audit committee, independent commissioner on the integrity of financial report and significant effect on the integrity of the quality audit of financial report.

Institutional Ownership and Flexibility in Payout Policy: Evidence from the Financial Crisis

I study the role of institutional stock ownership in facilitating flexibility in firms’ payout policy by examining payout reductions during the financial crisis of 2008-2009. Treating the financial crisis as a systemic, negative shock to firms’ access to capital markets, I find that firms with higher institutional holdings were more likely to reduce payout to their shareholders. The payout reduction is overwhelmingly driven by cuts in share repurchases attesting to the flexible nature of share repurchases as documented in the literature. The findings are robust to different measures of institutional ownership. I attempt to further examine the mechanism behind this effect by incorporating several proxies for information asymmetry in my analysis and conclude that the primary driver is the mitigation of information asymmetry brought about by increase in institutional shareholding. However, my findings are not inconsistent with institutional investors reducing agency conflicts between management and shareholders.

MANAJEMEN LABA: BUKTI EMPIRIS PADA PERUSAHAAN PERBANKAN YANG TERDAFTAR DI BURSA EFEK INDONESIA

; "> This research aims to investigate the effect of board commissioners effectiveness, audit committeeeffectiveness, institutional stock-ownership, and public stock-ownership on Earnings Managementactivities. The efectiveness of board comissioners and audit committee are measured based on theircharacteristics such as independence, activity, size, and competence. The research design isquantitative method. The Sample used in this study consisted of 31 Banking companies listed onIndonesian Stock Exchanges for the period of 2011 to 2013. The research hypothesis is tested usingOrdinary Least Squares methods (OLS). The result shows that board of commissiors’ effectivenes andpublic stock ownership do not affect on the earnings management activites. Also, audit committeeeffectiveness do not give effect on earning management activites except audit committee’scompetence which is found to impact on reduction of earnings Management. Other independentvariables such as institutional stock ownership is proven to influence earnings managementactivities.Keywords: Board Commissioners Effectiveness, Audit Committee Effectiveness, Institutional StockOwnership, Public Stock-Ownership, Earnings Management

How does analysts' forecast quality relate to corporate investment efficiency?

We examine the impact of financial analysts on the efficiency of firms' investment decisions. We use the accuracy and dispersion of financial analysts' earnings forecasts as proxies of analyst expertise and quality in making forecasts. We find that high quality forecast is associated with higher investment if the firm is more likely to under-invest and lower investment if the firm is more likely to over-invest, suggesting that forecast quality increases firm-level investment efficiency. We further show that such effects are stronger for the firms with higher information asymmetry and lower institutional stock ownership. The results are consistent with the notion that higher quality of analyst forecasts increases the information environment and external monitoring, which in turn increases investment efficiency.

Institutional stock ownership and firms’ cash dividend policies: Evidence from China

Agency theory suggests that outside shareholders prefer higher dividend payouts in order to reduce the free cash flows of firms that are under the insiders’ control. Our study investigates the effects of mutual funds, typically the most important and influential type of outside shareholder, on firms’ dividend payouts in China during the period from 2003 to 2011. We find that mutual funds influence firms to pay higher cash dividends. The results are consistent with the predictions from exit theory. The effects are more pronounced in firms controlled by state and regional governments and in firms with relatively higher free cash flows. We also find evidence that the mutual funds’ effects are stronger when their investment horizon is longer and the ownership interest is larger. Other institutional investors, such as banks, insurance companies, and securities companies have a lower exit threat and do not have an influence on firms’ cash dividend payments or financial performances.

The Relationship between the Corporate Governance and the Stock Institutional Ownership with the Dividend- a Case Study of Tehran

This study focuses on the relationship between the corporate governance and the institutional stock ownership with the divided in Tehran stock exchange, which the corporate governance consist of variables such as: the board size, the board independence and the duality. The study uses the descriptive and analytical method based on a combined data analysis. It is applied the data of 81 accepted companies at Tehran Stock Exchange as a sample covering data from 2005 to 2011. Multi variables regression model is used to analysis the data. The results indicate the meaningful relationship between the corporate governance variable and the dividend. In other words, the companies with the lower rate of the corporate governance pay more dividends to the shareholders. In addition, there is not meaningful relationship between the institutional stock ownership and the dividend variables because the most of Iranian companies ownership structure owned by government institution. The results of this paper will be useful who want to involve in the capital market based on the company dividend decision makers the stock market in Iran.

Institutional Investors and Stock Market Liquidity: Trends and Relationships

In this paper we show that institutional participation in the U.S. stock market in recent decades has played an ever increasing role in explaining cross-sectional variation in stock market illiquidity. We first document trends in the growth of institutional stock ownership using the 13F holdings, extending the evidence by thirteen years to the end of 2010. In contrast to previous research, we find that institutions, and particularly hedge funds, have increased their holdings of smaller stocks and decreased their holdings of larger stocks over this period. Institutions currently underweight the largest stocks and overweight the smallest stocks relative to market weights. We then examine the relation between illiquidity and two measures of institutional stock ownership – the percentage of a stock owned by institutions and the number of institutions that own the stock – both in the cross section and through time. We find that: (1) the number of institutions that own and trade a stock is more important than the percentage of institutional ownership in explaining the cross-sectional variability of illiquidity; and (2) the power of the number of institutional owners in explaining illiquidity is significantly stronger in the second half of our sample period.

Changing Institutional Preferences for Stocks: Direct and Indirect Evidence

Institutional investors have rapidly increased their percentage holdings of US equities in recent years. In this paper we update previous research on the nature of institutional stock ownership, extending the evidence by eleven years to the end of 2008. In contrast to previous research, we find that institutions, and particularly hedge funds, have increased their holdings of smaller stocks and decreased their holdings of larger stocks over this period. Institutions as a whole now underweight the largest stocks and overweight the smallest stocks relative to market weights. We then compare the direct evidence of changing institutional preferences to the indirect evidence from a four-factor model.

The Impacts Of Institutional Stock Ownership On Stock Returns And Performance: A Financial Market Perspective

<p class="MsoBodyText" style="line-height: normal; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Recent studies indicate that corporations with high Institutional ownership have higher stock prices than those with less Institutional ownership. Even small companies with high Institutional ownership have higher stock prices in their range. Institutions have researchers and analysts to investigate the financials and the industry potential of the firms. As a result, the perception is that high institutional ownership indicates good value<span style="color: #ff6600;">. </span>This study investigates if the percentage of institutional ownership directly correlates with the price of stocks.<span style="mso-spacerun: yes;">  </span>The relationship between the Institutional ownerships and price was prevalent. This was more indicative among the large cap stocks than the small caps stocks.<span style="mso-spacerun: yes;">  </span>It was also found that the higher the percentage of Institutional ownership does reflect a higher stock price.<span style="mso-spacerun: yes;">  </span>This was manifest among the large caps than the small caps. </span></span></p>

Are incentives for earnings management reflected in the ERC: Large sample evidence

Abstract In this study, I examine the effect of exposure to earnings management (EM) incentives on the earnings response coefficient (ERC). Drawing from several anecdotes and normative arguments about the implications of managers' incentives for investor perception, I predict and test that exposure to EM incentives is negatively associated with the ERC. I find that ERC is reliably lower for firms with elevated exposure to EM incentives, holding constant the effects of actual EM and other factors that affect the returns–earnings relation. Furthermore, the effect of the incentive exposure on cash flows as well as on total accruals is reliably negative. These results are robust across alternative price– and returns–earnings specifications, and are insensitive to the inclusion of other measures of earnings quality. Additional analysis shows that the effect of such incentives on the ERC is more pronounced at higher levels of institutional stock ownership. However, a certain class of institutional owners – transient institutions – are less sensitive to the implications of such incentives for earnings quality.

The empirical relationship between ownership characteristics and audit fees

The present study examines the empirical relationship between ownership characteristics and audit fees. The basic premise is that the level of ownership sophistication and the extent to which ownership is large and substantial impact the effectiveness of stockholder monitoring on corporate affairs including the financial reporting process. Furthermore, high managerial ownership firms may experience a decline in agency problems in financial reporting due to a decrease in managerial propensity to misreport financial results. By employing a cross-sectional least squares regression analysis for a sample of 358 New York Stock Exchange-listed firms audited by the Big Five auditors, we find evidence of a significantly positive relationship between diffused institutional stock ownership (i.e., having less than 5% individual shareholding) and audit fees, and a significantly negative relationship between institutional blockholder ownership (i.e., having 5% or more individual shareholding) and audit fees. Finally, we document that managerial stock ownership is negatively associated with audit fees. We do not, however, find evidence of any relationship between noninstitutional blockholder ownership (with at least 5% individual stock ownership) and audit fees. The study's main results hold in various specification tests including when the effects of board-related and audit committee variables are factored in the analysis. Based on the observed relationship between the ownership variables and audit fees, we suggest that the ownership characteristics of a firm as a part of its governance mechanism constitute an important determinant of audit fees.