Investor Ownership Research Articles

Pengaruh Kualitas Pengungkapan Keuangan dan Struktur Kepemilikan Terhadap Asimetri Informasi

Abstract -The presence of information asymmetry increases transaction costs and reduces liquidity, and reduces the quality of investment decisions taken by investors. So that in turn it weakens the overall function of the market. Accounting disclosure plays a role in mobilizing information from management and investors so as to reduce information asymmetry. In addition, it is hoped that the presence of a concentration of investor ownership can carry out internal monitoring of the company so as to reduce information asymmetry. On the other hand, institutional investors have many incentives to access company information for their trading purposes due to the conflict of interest between outside investors and the board of directors. This study aims to determine the effect of disclosure quality and ownership structure on information asymmetry in companies listed on the Jakrta Islamic Index (JII) during the 2015-2019 period. Based on the results of panel data analysis of the Fixed Effect Model (FEM), it was found that institutional ownership had a significant positive effect on information asymmetry, while the quality of disclosure and ownership concentration did not have a statistical effect on information asymmetry.

Individual investor ownership and the news coverage premium

If widely-circulated news providers cater to the information demands of individual investors, stocks with high individual ownership should receive more news coverage, theoretically resulting in lower volatility and a lower cost of capital. In this paper, I explore this hypothesis by utilizing the extensive news sources available in Bloomberg Terminals to construct a monthly panel dataset of S&P 500 firms between 2012 and 2019. I verify that companies with a higher percentage of individual investor ownership receive more news coverage, and that this effect is strongest among larger firms. In order to quantify the importance of this mechanism for stock prices, I estimate a panel VAR model and conduct a counterfactual analysis where the news coverage response to exogenous shifts in ownership composition is effectively “shut off”. The counterfactual analysis implies that an increase in news coverage triggered by a one standard deviation rise in individual ownership reduces annual stock volatility by 0.51% and annual returns by 0.135%, suggesting that the individual investor-news coverage channel partially offsets the more well-documented informational advantages of institutional ownership.

Corporate governance and IPO underpricing: evidence from the italian market

This paper aims to analyse the impact of firms’ corporate governance characteristics on the degree of first-day returns (i.e., underpricing) in the Italian initial public offering (IPO) market. In particular, this work investigates the impacts of the characteristics of boards of directors (BoDs) and ownership structure on the underpricing of newly offered shares. By studying a sample of 128 Italian IPOs between 2000 and 2016, it is concluded that corporate governance characteristics affect the degree of first-day returns following a company’s IPO. More specifically, the size of the BoD negatively affects underpricing, while the ownership of institutional investors and board members has a positive effect on the degree of underpricing. Conversely, no significant evidence is found with regard to board independence, the number of female directors in the boardroom, the implementation of stock option plans and ownership concentration.

Do investors and analysts value strategic corporate social responsibility disclosures? Evidence from China

AbstractThis paper examines whether strategic corporate social responsibility (CSR) disclosures are value relevant for investors and analysts in the context of China. Using a sample of Chinese listed firms from One Belt One Road (OBOR) theme indices, we construct a rating system of strategic CSR disclosures including five dimensions and 20 indicators and perform a principal component analysis and a non‐hierarchical cluster analysis to group sample firms. We find that the market has a positive reaction to strategic CSR disclosures, but the market fails to perceive whether such disclosures are credible. We also find that the number of analysts following a firm is positively associated with its strategic CSR disclosures, and the positive association between strategic CSR disclosures and analysts following is less pronounced for firms with lower credibility. Additional analyses demonstrate that the higher the strategic CSR disclosure quality the more the positive market reaction and that the higher the strategic CSR disclosure quality the more the numbers of analysts following, but this positive association between disclosure quality and analysts following is discounted by a firm's lower credibility. Additional analyses further confirm that the CSR disclosure mandate has a negative moderating effect on investors’ and analysts’ positive reactions to strategic CSR disclosures. We do not find convincing evidence that the ownership of foreign institutional investors (QFII) has a moderating effect on investors’ and analysts’ reactions to strategic CSR disclosures. Finally, our extended analyses reveal that strategic CSR disclosures have a positive effect on firm performance with a complementary mediation of innovation.

Corporate governance, institutional investor type and firm performance: Evidence from an emerging market

The study analyses the role of institutional investors in improving firm performance. Unlike in developed economies where firm ownership is widely dispersed, firms in emerging economies such as India have substantial promoter shareholdings (often in a majority or close to a majority). Given the promoter control of Indian companies, the role of institutional investors as external monitors is analysed. Following Brickley, Lease, and Smith (1988) and Almazan, Hartzell, and Starks (2005), the study categorises institutional investors as pressure-sensitive and pressure-insensitive institutional investors. Panel data for non-financial firms from India included in National Stock Exchange (NSE) 500 over the period 2008–2017 is studied using fixed-effects models. The study finds that the increased ownership of pressure-insensitive institutional investors is positively associated with firm performance. Also, the increased ownership of pressure-sensitive institutional investors is negatively associated with firm performance. These findings are consistent with the view that pressure-insensitive institutional investors are more effective monitors compared to pressure-sensitive institutional investors. The study offers insights into the role of institutional investors in economies where firms have a substantial promoter shareholding. The study documents that even with a substantial promoter shareholding and control, pressure-insensitive institutional investors aid in enhancing firm value

Do Investors and Analysts Value Strategic Corporate Social Responsibility Disclosures? Evidence from China

This paper examines whether strategic corporate social responsibility (SCSR) disclosures are value-relevant for investors and analysts in the context of China. Using a sample of Chinese listed firms from One Belt One Road (OBOR) theme indices, we construct a rating system of SCSR disclosures including five dimensions and twenty indicators and perform a principal component analysis and a non-hierarchical cluster analysis to group sample firms. We find that the market has a positive reaction to SCSR disclosures but the market fails to perceive whether such disclosures are credible. We also find that the number of analysts following a firm is positively associated with its SCSR disclosures and the positive association between SCSR disclosures and analysts following is less pronounced for firms with lower credibility. Additional analyses demonstrate that the higher SCSR disclosure quality the more positive market reaction, and that the higher SCSR disclosure quality the more numbers of analysts following but this positive association between disclosure quality and analysts following is discounted by a firm’s lower credibility. Additional analyses further confirm that the SCSR disclosure mandate has a negative moderating effect on investors’ and analysts’ positive reactions to SCSR disclosures. We do not find convincing evidence that the ownership of foreign institutional investors (QFII) affects investors’ and analysts’ reactions to SCSR disclosures. Finally, our extended analyses reveal that SCSR disclosures have a positive effect on firm performance, which seems to be a plausible reason for investors’ and analysts’ positive reactions to SCSR disclosures.

Labor Market Networks and Asset Returns

This paper proposes a measure of labor market connectivity based on the similarity in the composition of occupational knowledge characteristics across industries and provides evidence of return predictability in the cross-section of industries that are connected through the labor market. In long-short portfolios, an industry's return is strongly predicted by the past return of its labor-market-connected neighboring industries with an annualized return of up to 9%, which is not explained by established asset pricing models. The return predictability remains significant after controlling for the supply chain momentum as well as the industry lead-lag effect, and is concentrated in stocks with higher arbitrage costs and higher ownership of uninformed investors. We find similar predictive relations for the labor productivity, wages, employment, and profitability of labor connected industries. Our findings are consistent with positive spillover of productivity shocks among industries that are connected through the labor market. Informational frictions, costly arbitrage, and investors' limited attention magnify the delayed response of stock prices to the spillover of labor productivity shocks, which results in the observed return predictability.

The Effect of Investor Credit Supply on Housing Prices

What is the effect of investor credit supply on housing prices? We provide evidence on this question using quasi-experimental variation in credit supply to investors caused by two macroprudential policies implemented in Australia. The first policy placed a bank-level cap on mortgage credit growth to investors while the second policy placed a bank-level cap on the share of interest-only mortgage lending. We show that the first policy caused a sharp and large drop in credit growth to investors relative to owner-occupiers, while the second policy caused a modest relative decline in credit growth for investors, who disproportionately use interest-only loans. We use variation in the investor ownership share across regions and dwelling types to identify the effect of investor credit supply on housing prices, rents and transaction volumes. We find no significant effect on the growth rate of housing prices caused by the first policy. However, there was a relative rise in the price of investor housing following the second policy, which is consistent with the use of interest-only lending being a more binding constraint for owner-occupiers than investors. There is evidence that the lending restrictions lowered transaction volumes but rents were unaffected. Our findings are consistent with models assuming a largely unconstrained housing rental sector.

Legal protection of foreign investor ownership from political risks in the Kurdistan Region (Analysis Study)

Legal protection of foreign investor ownership from political risks in the Kurdistan Region (Analysis Study)

Board Structure, Ownership and Performance of Indian IPOs: An Empirical Investigation

This paper is an attempt to explore the signaling effect of corporate governance mechanisms on IPOs of emerging market economy. Using a sample of 124 Indian IPOs for the period April 2009 to March 2015, the study tries to find out the impact of board characteristics and share ownership of different stakeholders on short and long term IPO performance. In Indian context, this paper makes the first attempt to highlight the impact of corporate governance mechanisms on long run IPO performance, measured by market adjusted buy and hold returns (BHR). The results of the analysis show that in Indian context, subscription rate, equity retention by executive and non-executive directors and promoter CEO have significant impact on IPO underpricing. Board size, promoter CEO and retained strategic investors ownership have significant impact on IPO long run performance. Overall the results show that corporate governance attributes play a limited role in explaining underpricing and long run IPO performance in Indian context. However, investors can use the corporate governance attributes as certificate mechanisms to select potentially high value IPOs for both short and long-term investments. The issuing firms can restructure their boards and ownership patterns to enhance the value of the firm, to get fair value of their IPOs and benefit their long-term shareholders.

Institutional Ownership and Corporate Social Performance in Emerging Economies Multinationals: Evidence from India

This study fills the gap in the literature by considering the heterogeneous impact of institutional ownership on various dimensions of corporate social performance (CSP). Using the behavioural risk agency perspective, we argue that the risk behaviour of various institutional owners is not the same towards the CSP. We have taken a balanced panel sample of 61 Indian multinational firms for the span of 2013–2018 to test the proposed hypotheses. Results show a negative association of pressure-sensitive institutional investors’ ownership with social and governance dimensions of CSP. Mutual funds ownership is positively associated with the social and governance dimensions of CSP. Foreign institutional investors ownership has no significant impact on CSP. We found that the environmental dimension of CSP is ignored by institutional owners. The moderating effect of firm internationalisation on the relationship between institutional ownership and CSP is also examined.

Determinants of Hedge Fund Investment in Corporate Endgames

Under German law the corporate endgame process of obtaining full control over a company offers multiple investment opportunities for investors with high investment flexibility, and is therefore particularly attractive to hedge funds. This paper investigates the determinants of hedge fund investment in corporate endgame processes based on a sample of 76 endgame situations of publicly listed German companies and investment data of 326 hedge funds. Examining characteristics of investment targets, we find that hedge funds invest in companies with a non-dominant majority owner and a high stake of index funds as latter’s limited ability to react in change of control situations creates a supportive investment environment. Hedge funds are most likely to invest after takeover consummation and before announcement of a new endgame transaction. Investigating the determinants of ongoing engagement after initial investment, we find that the ownership of other institutional investors, especially hedge funds, positively affects engagement likelihood, serving as a validation of the own investment approach. Abnormal performance and trading liquidity of target stock also positively affect hedge funds’ engagement. The results indicate that the endgame process in Germany is an attractive investment opportunity for hedge funds, while their involvement also adds complexity to the corporate control process.

Legal Analysis of Supporting Methods of Foreign Investors in Nationalization and Property Confiscation

Nationalization of foreign investor assets does not serve the interests of countries because it disrupts the economic security of states and ultimately leads to a reduction in foreign investment. Governments have sought to minimize investor nationalization and property confiscation in order to attract foreign investment. In the event of expropriation of a foreign investor, governments are required to compensate the investor. The position of customary international law on how to pay compensation and methods of assessing damages includes procedures based on national law, treaties and judicial decisions or arbitration. In order to support investors, it is necessary that the right to nationalize property and expropriation of investors should be very limited. Further, in case of nationalization, the damage must be compensated in a desirable and effective manner. The foreign investor must enjoy the same rights as domestic investors and at the same time have the right to transfer their capital and profits abroad. Appropriate measures should also be taken to amend national laws in order to consolidate and guarantee the ownership of foreign investors.

The Effect of Foreign Investor Ownership Share and BIG 4 Auditors on Value Relevance in Family Firm Ownership Share

The Effect of Foreign Investor Ownership Share and BIG 4 Auditors on Value Relevance in Family Firm Ownership Share

Institutional Investors Ownership and Financial Performance: Examining the Nexus in Nigerian Deposit Money Banks

The main aim of this paper is to examine the impact of institutional investor’s ownership on the financial performance of deposit money banks listed on Nigerian stock exchange (NSE). The time frame for this study is 2011-2018. Data was generated from annual reports of 15 deposit money banks listed on NSE. The result of the panel data methodology shows a positive and significant relationship between institutional investor’s ownership and banks financial performance. The study recommended that management of banks should give more attention to the large institutional shareholders due to their influence on the growth and survival of the company.

Engaging Employees for the Long Run: Long-Term Investors and Employee-Related CSR

This article explores whether and how long-term investors influence non-executive employees’ incentives. While long-term investors benefit from long-term investments that create value over time, employees tend to be averse to long-term investments. We conjecture that long-term investors foster employee-related CSR to motivate employees to engage in long-term investment projects. Consistent with this prediction, we find that long-term investor ownership is a strong driver of employee-related CSR. Additional analyses indicate that this result is not driven by self-selection or reverse causality. We further show that employee-related CSR leads to increased long-term investments (R&D expenses and corporate innovation). Overall, our findings highlight that employee-related CSR is an important channel through which long-term investors encourage long-term investments.

UK REIT conversion and institutional ownership dynamic

PurposeThe purpose of this paper is to examine the impact of conversion to REIT status by former listed property companies in the United Kingdom on the level of institutional ownership during the period of 2007–2016.Design/methodology/approachThis paper uses an event study framework to track the change in institutional ownership three years before and after a REIT conversion event. This event study approach circumvents the sample selection bias issue associated with the conversion event wherein the decision to convert to REIT is likely to be endogenous.FindingsPanel regression analysis reveals that changing to REIT status led to a 12.8 and 15.2% increase in institutional ownership and number of institutional investors, respectively. The first order of priority in institutional investors' investment in REIT shares is their preference for liquidity. Further analysis shows that institutional investors changed their preferences towards characteristics associated with systematic risk, firm age and liquidity after the conversion event by becoming less averse to firm-specific risk, placing more emphasis on firm age and less emphasis on systematic risk and liquidity.Practical implicationsOverall, conversion to REIT status helps increase former property companies' investor base, which is in line with the regulator's aim to open up the property market to a wide range of investors through the introduction of a REIT regime. Findings from this paper also have policy implications for countries that are considering a REIT regime for their capital market and existing REIT regimes without a formal conversion mechanism.Originality/valueThis paper offers, for the first time, evidence on 1) how conversion to REITs influences firms' institutional ownership and 2) the determinants of converted REITs' institutional ownership.

Foreign investor dominance and low domestic investor absorption capacity: Implications on capital outflows

AbstractThis study puts forward the increased share of foreign investors as a potential stabilizer for local financial markets, especially equity markets, because domestic investors' weak absorption capacity may create liquidity constraints acting as an obstacle for foreign investor. We pin down the effects of foreign investor dominance based on a detailed stock‐ownership data. Our findings suggest that in emerging financial markets with high foreign investor ownership and low absorption capacity of domestic investors, capital outflows might be staggered, and this phenomenon might reduce the probability of large and sudden depreciation of local currencies.

Cross-Regional Differences in News Tone and Local Stock Ownership

This study examines cross-regional differences in news tone for the same news event and relates it to local stock ownership of individual investors using a combination of detailed investor and media data. The results show that news tone amplifies the overall attention effect and decreases the difference between the trading activities of local and nonlocal investors when locally sourced news is republished across regions. In general, trading activity decreases for given republished news, but it still exists because the same news event garners attention as it diffuses to other regional outlets in a different news tone. Overall, individual investors seem to realize that the news is stale but expect subsequent price reversals following the republished news, thus showing news-contrarian trading behavior. Furthermore, they distinguish good firms from bad firms, indicating that adverse selection is partially responsible for the observed news-contrarian trading behaviors. This paper was accepted by David Simchi-Levi, finance.

Yabancı Yatırımcı Sahipliği Oranındaki Değişimin Getiri, Volatilite ve Likidite Üzerindeki Etkisi: BIST GYO Sektörü İçin Panel Veri Analizi

This study aims to test the validity of base broadening hypothesis for the impact of changes in foreign investors’ ownership on the return, volatility and liquidity of the shares of the real estate investment trusts (REITs) traded in Borsa Istanbul between 2010 and 2018 by panel regression analysis. Results show that a statistically significant relation exists between the sudden changes in the ownership of the foreign investors and the return, liquidity and volatility of the shares for a short term (up to 3 months). So, it has been seen that base broadening hypothesis is not valid for a long period of time. Even if it can be claimed that price pressure hypothesis could prevail looking at the statistically significant relationship for a short time, it has been considered that this case emerged thanks to the domestic investors paying more court to the market with trading more shares when they were informed about the changes in foreign investors’ ownership depending on its nature as information content, not as a result of the traded shares actually by the foreign investors.