Types Of Institutional Investors Research Articles

Institutional investor behaviour and the energy transition: A complexity framework for accelerating sustainable finance from UK investors

Despite sustainable investment flows having increased significantly over the past decade for transforming the current energy system, a large investment gap remains. This research explores the complex links between institutional investors' expectations on the speed of the energy transition and their sustainability-related investment behaviours. Through in-depth semi-structured interviews with institutional investors, we construct a complex system model using a causal mapping approach, illustrating complex relationships within the sustainable investment system. Our contribution involves the development of multi-layer cognitive maps for different types of institutional investors, followed by a composite causal map that dissects key investment behaviours and investor expectations. Results reveal interlinked concepts influencing investment behaviour and highlight feedback loops with potential amplifying effects on investor expectations and investment behaviour. Two critical feedback loops emerge: 1) the interplay between political and financial support for the energy transition and the associated cost, and 2) the intricate relationship between sustainability factors and asset valuation. Addressing these interconnected issues simultaneously and monitor negative feedback loops that may curtail sustainable finance flows are vital. The results reveal heterogeneities amongst institutional investors such as fiduciary duties, stranded assets, the importance of fossil fuels in the energy system. In sum, our insights provide a foundation for holistic energy policies and a reference system for evaluating policies aimed at accelerating green finance.

R&D investments in emerging market firms: the role of institutional investors and board interlocks

Despite the increase in institutional investor shareholdings in emerging market firms, their impact on R&D investments has received scant attention in the literature. By integrating agency and resource dependence perspectives, we examine the role of different types of institutional investors and their interactions with board interlocks in shaping their preference for R&D investment in their portfolio firms. We test our hypotheses on a sample of 2,478 Indian firm‐year observations from 2005 to 2019, using various estimation techniques. Our results indicate that different categories of institutional investors have distinct preferences for R&D investment. Specifically, we find that ownership by both foreign institutional investors and mutual fund investors negatively impacts R&D investments in firms. While board interlocks positively moderate the impact of institutional investors such as banks and financial institutions and foreign institutional investors on R&D investments in firms, this moderation is negative in the case of mutual fund investors and R&D investments in firms. We contribute to the understanding of the determinants of R&D investments in emerging market firms, with a specific focus on institutional investor ownership and add to the nascent literature on the interaction between two forms of governance, i.e., ownership and board characteristics, in shaping this firm strategy.

Institutional investors and mispricing of unionized firms

AbstractWe examine investment by different types of institutional investors in firms with strong labor unions. We find that hedge funds own a lower percentage of shares in these firms than in other firms. In contrast, passive institutional investors and institutional investors as a group own a higher percentage. Our tests suggest that the relation between unionization and hedge fund ownership is causal: When union power changes in a firm, hedge fund ownership changes in the opposite direction. Instead, passive investor holdings in unionized firms seem to be driven by other firm characteristics.

PROFITABILITAS, KEPEMILIKAN INSTITUSIONAL DAN NILAI PERUSAHAAN: DAMPAK PANDEMI COVID-19

This study aims to examine the Institutional Ownership, Profitability and Pandemic Covid-19 on Firm Value. The population of this study are companies listed on the Indonesia Stock Exchange (IDX) 2018 - 2020. The sample selection in this study uses purposive sampling to obtain samples that represent the predetermined criteria. This research is included in quantitative research – secondary data. This research uses balance panel regression in processing the data. The estimation method used in this study is the Fixed Effect Model (FEM). The research data is processed using E-Views 10. The results of this study indicate that institutional ownership has a significant negative effect on firm value with and without the Covid-19 variable involved. However, the profitability variable has a significant positive effect on firm value when the Covid-19 variable is not included. After the Covid-19 variable is included, profitability does not have a significant effect on firm value. The implication of this research is that individual investors and the stock market are more wary of companies that have large institutional ownership and Signaling Theory can explain phenomena and test the value of companies during the COVID-19 pandemic. Future research is expected to be able to separate the types of institutional ownership by type such as banks, foundations, brokers, etc. because each type of institutional investor has different characteristics. And further research can expand the observation period and consider other factors that affect firm value.

Do pressure-sensitive institutional investors moderate CSR decisions towards value creation of Indian firms?

Purpose Research on the significance of corporate social responsibility (CSR) and value creation is nascent as compared to CSR and financial performance. The concept of value is also evolving because of changing business environments, globalization and the expanded idea of CSR. Nowadays, managers expect a more quick, pragmatic approach to satisfy valid stakeholder claims while simultaneously creating competitive advantage through reputation and investor value. The paper aims to examine the impact of CSR on the market and sustainable value creation through CSR expenditure in India and the moderating role of pressure-sensitive institutional investors (PSII). Design/methodology/approach The study used panel data regression methodology on a sample of 1,845 non-financial Indian firms from 2015 to 2021. Findings CSR creates market and sustainable value for non-financial Indian firms in line with stakeholder theory. The authors find a positive moderating role of governance represented by PSII on CSR and market value creation but not on sustainable value. Research limitations/implications The study is based on secondary data. CSR, despite being a regulatory obligation, provided long-term benefits that increased their sustainable growth rate. The results highlight the importance given by financial markets to CSR activities. Other types of institutional investors can also be examined in future research. CSR can be embedded in the core operations of the firm, which can help in fostering a culture of sustainability and responsible business practices that benefit firms and society as a whole. Tax incentives can be provided to firms investing in CSR. Practical implications CSR provides long-term benefits to the firm, which enhances the goodwill and integrity of the firm in the market. The results reveal that besides capital market investors, firms are subject to the scrutiny of consumers, communities and the government as expectations rise and information spreads faster, which can have repercussions. CSR helps in meeting such expectations and the perceived value of the firms. Managers and chief executive officers (CEOs) can pay attention to the type of institutional investors like PSII, which can be formed as a part of the firm’s CSR strategy. Social implications The positive impact of CSR on sustainable value expresses a long-term management orientation based on the improvement of stakeholder relations and the associated environmental impacts referring to cohesion and consensus, market opportunities and strengthened reputation and image. A sustainable company involves a conscious and continuing effort in the equilibrium between contrasting stakeholders’ expectations in an attempt to optimize value creation. Tax exemption can be provided for CSR activities. Originality/value The authors contribute to the scant literature on CSR and value creation, especially sustainable value, as most of the prior studies are not empirical on sustainable value in the Indian context. Managers and CEOs can pay attention to the types of institutional investors like PSII, which can be formed as a part of the firm’s strategy.

Institutional investors, heterogeneity, and capital structure decisions: Evidence from an emerging market

This paper uses data on Chinese A-share listed firms from 2008 to 2020 to examine the effect of institutional investors on capital structure by considering different types of institutional investors and firms. The results find that institutional investor shareholdings have a significant negative effect on capital structure. Further, compared with pressure-sensitive institutional investors, pressure-resistant institutional investors have a stronger negative effect on capital structure. And compared with non-state-owned firms, institutional investors have a stronger negative effect on the capital structure of state-owned firms. Institutional investors lower firm leverage by decreasing agency costs (governance channels) and reducing information asymmetry (information channels), and the effect of governance channels dominates. Finally, firms become more likely to reduce debt than issue equity to lower leverage in response to increased institutional investor shareholdings. These findings shed light on the role of institutional investors in capital structure decisions in emerging markets.

Corporate ESG Performance and Shareholding Preference of Institutional Investors

With the widespread recognition of ESG investment concept, institutional investors in China's securities market are paying more and more attention to ESG performance of enterprises. However, different types of institutional investors pay different attention to ESG performance, and their shareholding preferences may be different. This paper takes A-share listed companies from 2018 to 2021 as samples to conduct an empirical study. The results show that: on the whole, institutional investors have an obvious ESG preference in China's A-share market, and corporate ESG performance is significantly positively correlated with institutional shareholding ratio. The research on different types of institutional investors shows that independent institutional investors have more obvious ESG preference for shareholding compared with non-independent institutional investors.

The effects of institutional investors on firms' green innovation

AbstractStakeholder theory suggests that institutional investors, as firms' vital stakeholders, might play a crucial role in influencing firms' green innovation. Considering both the shareholding and portfolio characteristics of institutional investors, we investigate the effects of different types of institutional investors with various supervisory motivations and governance capabilities on firms' green innovation. Importantly, we also explore which types of institutional investors become the driving force behind firms' green innovation. Furthermore, we consider how various aspects of financial and social benefits as contingencies affect the relationship between different types of institutional investors and firms' green innovation. Based on 5473 observations of Chinese manufacturing firms from 2013 to 2019, we find that, when considering institutional investors' effects on firms' green innovation, it is better to simultaneously consider both the shareholding and portfolio characteristics of institutional investors than to consider only one or the other. Dedicated institutional investors with more shareholding independence and higher portfolio concentration are positively associated with green innovation and are the driving force behind it, while transient institutional investors are not. However, institutional investors' effects on green innovation will change because of contingencies related to firms' financial and social benefits, generally presenting the characteristics of “pursuing benefits and avoiding risks.” Specifically, dedicated institutional investors promote green innovation for firms with satisfactory financial and social benefits to pursue long‐term benefits but do not have significant effects on the green innovation of firms with general or unsatisfactory financial and social benefits. By contrast, transient institutional investors are inclined to hinder green innovation for firms with unsatisfactory financial and social benefits to avoid short‐term risks; at the same time, they have insignificant effects on the green innovation of firms with satisfactory or general financial and social benefits.

Ownership and corporate governance across institutional contexts

AbstractResearch Question/IssueThe purpose of this special issue (SI) is to encourage research examining the effect of different ownership types in and from different countries on corporate governance and objectives.Research Findings/InsightsThe articles included in this SI provide novel insights as to the influence of different types of owners, including states and sovereign wealth funds, families, and different types of institutional investors, as well as of other features of ownership structures, on various aspects of corporate governance, in a variety of institutional contexts.Theoretical/Academic ImplicationsAs companies face different institutional contexts when they operate internationally, and shareholders have become increasingly global, the resulting heterogeneity of shareholder types poses new challenges in our understanding of their behavior. This SI is a step in the direction of disentangling the complex implications of ownership for corporate governance across institutional contexts.Practitioner/Policy ImplicationsTogether with other owner types, the ever‐increasing $100 trillion global asset management industry representing 40% of global market capitalization (PwC, 2020) fuels corporate governance and performance pressures on portfolio companies. The articles included in the SI provide useful insights as to the new ownership landscape and its consequences for operating firms in different countries.

Monitoring or Colluding? Institutional Investors' Heterogeneity and Environmental Information Disclosure Behavior.

High-quality environmental information disclosure is not only an effective way for the firm to fulfill its environmental responsibility and promote green development, but also an important governance mechanism to reduce the degree of information asymmetry between the firm's management and shareholders and alleviate the agency conflict. As an important shareholder of a firm, there are two different hypotheses about the influence of institutional investors on firm decision-making and behavior: monitor and collusion. Institutional investors are not homogeneous, and there are significant differences in the impact of different types of institutional investors on firm decision-making and behavior. We divide institutional investors into the stable institutional investors and the unstable institutional investors, using the data of listed firms in China's A-share heavy pollution industry between 2008 and 2020, and this study explores the effect of institutional investors' heterogeneity on environmental information disclosure behavior from the perspective of environmental information disclosure quality. Empirical evidence shows that institutional investors as a whole have a positively significant impact on environmental information disclosure quality. Further analysis shows that the stable institutional investors have positive impact on environmental information disclosure quality compared with the unstable institutional investors. After a series of robustness tests, the conclusion is still valid. The results of this paper show that institutional investors, especially the stable institutional investors, can effectively reduce the degree of information asymmetry, alleviate the agency conflict of the firm, play an active role in corporate governance, strengthen the main responsibility of firm ecological environment protection, and promote the green development of firm. The conclusion of this paper has important reference significance for the regulators to formulate policies to improve environmental information disclosure quality and promote green development according to the heterogeneity of institutional investors.

Effects of Heterogeneous Institutional Investors on the Performance of Portuguese Banks

Abstract Effective corporate governance is fundamental to the correct operation of the banking sector. This study examines corporate governance in terms of the effects of different combinations of institutional investors on the performance of Portuguese banks. Effects based on kind (e.g. type of institutional investor) and degree (e.g. institutional investor experience) are considered. The results of a crisp-set qualitative comparative analysis (csQCA) show that the simultaneous presence of banks and corporations as shareholders, and non-presence of financial companies can positively affect banks’ return on average assets (ROAA) and return on average equity (ROAE). This research provides a wider picture of possible impacts in terms of banks’ performance when there are different types of institutional owners. Lastly, the results are particularly relevant for the supervision protocols developed by the Bank of Portugal and the European Central Bank, in situations of changes of banks’ shareholders.

Are institutional investors “in love” with the sustainable development goals? Understanding the idyll in the case of governments and pension funds

AbstractConsidering the key role that companies must play to achieve the Sustainable Development Goals (SDGs), this paper aims to analyze the effect of the presence of two types of institutional investors (governments and pension funds) in large companies' ownership structure on the alignment of their sustainability strategy towards the 2030 Agenda as well as the moderating effect that firm internationalization and industry's sensitivity to stakeholder pressures have on the influence of these two institutional investors on business commitment to the SDGs. For a sample of 4089 multinational companies from 2015 to 2018, the results show that institutional ownership does matter for business commitment to the SDGs, but in a different way depending on the type of investor. Specifically, ownership by government favors commitment to the SDGs, while ownership by pension funds has a negative impact, which is partially corrected in the case of globalized companies as well as in those firms belonging to industries, which are highly sensitive to stakeholder pressures. These findings seem to suggest that institutional investors' support the implementation of the SDGs by the companies in which they invest is mainly driven by corporate complexity.

Institutional Investors in China: Corporate Governance and Policy Channeling in the Market Within the State

The extraordinary rise of China’s economy has made understanding Chinese corporate governance an issue of global importance. A rich literature has developed analyzing the Chinese Communist Party’s (CCP) role as China’s largest controlling shareholder and the impact that this has on Chinese corporate governance. However, the CCP’s role as the architect—and direct and indirect controller—of institutional investors in China has been largely overlooked in the legal literature. This Article aims to take the first step in filling this gap in the literature by drawing on Chinese sources and fresh hand-collected empirical, interview, and case study evidence to analyze the meteoric rise of institutional investors in China. It provides a taxonomy of institutional investors in China and reveals how the market for institutional investors has grown and has become increasingly “atomized” as different types of institutional investors have proliferated. The Article reveals how the CCP has actively and gradually promoted the growth of domestic institutional investors, in terms of types and size, through the relaxation of policies and law reforms to improve corporate governance and stabilize the stock market, while limiting the influence of foreign institutional investors. It further analyzes all the Activist Campaigns undertaken by institutional investors in China and maps the network of government bodies, regulations, and tactics that the CCP has developed to directly and indirectly control State-Owned Institutional Investors (SOIIs) and Private-Owned Institutional Investors (POIIs) for the purpose of policy channeling. This Article concludes by taking a step back and briefly considering what this examination of institutional investors tells us about China’s unique form of capitalism and system of corporate governance. It suggests that the rise of institutional investors in China has been strategically developed in a way to reinforce the CCP’s ultimate control over the financial system. However, contrary to what some conceptions of “state capitalism” may suggest, the CCP does not micro-manage institutional investors on a day-to-day basis. Rather, institutional investors normally function according to free-market forces and increasingly perform an important corporate governance role—with the CCP using its policy channeling in a targeted way to stabilize the market in times of crisis, execute important legal and market reforms, and to maintain calm in society during critical political events: what this Article termed as the “market within the state” for institutional investors in China.

The Role of Institutional Investors in Corporate Governance of Their Portfolio Companies – The Case of Croatia

The goal of this research is to examine the involvement of institutional investors in the corporate governance of companies in their portfolio by analyzing characteristics of institutional investors with respect to the type of investment, investment time horizon, and degree of involvement in the process of managing a company. The paper will outline the attitudes of managers on the level of investors’ involvement in the governance process in order to identify determinants of investment decisions, decisions to take corrective actions to enhance corporate governance, or decisions to leave the ownership structure. A qualitative approach was chosen, consisting of a series of structural interviews with 25 fund managers of different types of institutional investors. The results indicate that institutional investors are involved in the corporate governance of their portfolio companies, and that control mechanisms they use include voting rights, direct communication with the management with the aim of discussing strategies for future development, and collaboration with other institutional investors in the ownership structure.

Private Equity Funds/Venture Capital – A New Role and Opportunity in the Albanian Economy and Financial Market

The prolonged stagnation bank credit expansion, following the outbreak of recent economic and financial crises of 2008, and now the complex situation during the pandemic, has produced a significant impact on the availability of new and long-term sources of business financing, mainly related to mid and large-size companies, but also to start-ups. Currently, all such categories of businesses find difficulties in obtaining long-term financing from banks and this has major implications on financing their investments and projects in the pipeline. In a time when, paradoxically, bank credit is becoming increasingly complex and difficult and therefore, to score a significant influence on the economy and investment financing, and regardless of the existing liquidity abundance, establishing and developing Private Equity/Venture Capital Funds (PE/VC) can play an important contribution in this regard. Despite the fact that such type of institutional investor is currently lacking within the Albanian capital market, some basic legal, institutional and economic premises do exist within the Albanian financial landscape, and which could provide grounds for such an actor to play its role in providing an alternative source of long - term financing for Albanian businesses. Consequently, their existence could pave the way for revitalization of the idea and attempts to put into operation a functioning capital market in Albania, which is still rudimentary and non-active, and furthermore, helping in ensuring a sustainable long-term economic growth.

What sustainability assurance services do institutional investors demand and what value do they give them?

PurposeThe purpose of this study is to analyse the role played by institutional investors in a firm’s decision to hire sustainability assurance services and to determine the benefits of sustainability assurance for the functioning of the capital market. This analysis is complemented by examining the quality of the sustainability assurance service that institutional investors demand.Design/methodology/approachThe authors selected a sample of 1,564 multinational firms from 2002 to 2017. Panel data logit and generalised method of moments (GMM) regressions were estimated to consider decisions about hiring sustainability assurance services or not, and the assurance quality indexes constructed by a checklist based on the academic literature, respectively.FindingsInstitutional pressures associated with the environmental and social impacts of a firm’s activities lead to the convergence of institutional investor attitudes towards corporate sustainability, so that, regardless of their investment horizon, they promote the hiring of sustainability assurance services by corporate boards, which favours analyst precision and a reduction in the cost of capital. Long-term (LT) institutional investors exert influence through a selection mechanism, whereas short-term (ST) institutional investors exert influence through their presence on the board. Once the company has decided to provide assurance about its sustainability report, both types of institutional investors promote a higher quality of such service, although this is not well valued by the stock market.Research limitations/implicationsThis paper extends research on the monitoring role of institutional investors into the sustainability assurance context. Researchers may benefit from this paper’s findings when they examine the factors that drive the hiring of sustainability assurance services and their characteristics. This paper also shows that sustainability assurance services are a significant weakness due to the lack of standardisation in comparison with financial auditing, which complicates the assessment of their quality by stock market participants, thereby penalising those companies that provide more complete sustainability assurance reports.Practical implicationsConsidering this paper’s findings, it seems advisable that regulators establish a normative framework to standardise sustainability assurance processes. The results can also be used as an orientation for both companies, to design their sustainability disclosure policies and regulators, to improve the running of the capital market.Social implicationsSustainability assurance services have a positive effect on the running of the capital market and improve external stakeholder decision-making by providing more reliable information, which, in turn, will favour the implementation of more sustainable actions that contribute to the attainment of sustainable development goals.Originality/valueThis is one of the first papers to analyse the effect of institutional ownership on a firm’s decision to hire sustainability assurance services and consider the effect of the institutional investors’ investment horizon – LT versus ST – and the channel – selection methods and/or active engagement – used by them to exert their influence. The authors also propose several measures of sustainability assurance quality to demonstrate the relevance of the contents of the assurance statement for the capital market in general and the institutional investors in particular.

Institutional Investors Ownership and Firm Value: Evidence from Malaysia

Institutional investors play a significant role as an external watchdog to promote good governance to uphold firm value. The existence of institutional investors as shareholders is able to reduce the agency problem and the costs that arise from shareholder-manager relationship. This study aimed to examine the influence of institutional investors’ shareholdings and firm value among public listed firms in Malaysia. Specifically, it is argued that only pressure-insensitive institutional investors play an active monitoring role to increase a firm’s value, while pressure-sensitive investors, do not. This study employed 595 public listed firms from the main market in Bursa Malaysia for the period 2013 to 2017 (2795 firm-year observations). The results show that the pressure-sensitive and pressure-insensitive investors are positively significant to a firm’s value. These findings revealed that institutional investors in Malaysia play a significant role in increasing a firm’s value. This study will have a significant contribution to firms and the academic literature which states that all types of institutional investors in Malaysia are effectively monitoring their roles as an external corporate governance watchdog. The existence of these investors will be able to promote better governance and increase a firm’s value. Keywords: institutional ownership, pressure-insensitive and pressure sensitive institutional investors, firm’s value

Private Equity Funds/Venture Capital - A New Role And Opportunity In The Albanian Economy And Financial Market

The prolonged stagnation bank credit expansion, following the outbreak of recent economic and financial crises of 2008, and now the complex situation during the pandemic, has produced a significant impact on the availability of new and longterm sources of business financing, mainly related to mid and large-size companies, but also to start-ups. Currently, all such categories of businesses find difficulties in obtaining long-term financing from banks and this has major implications on financing their investments and projects in the pipeline. In a time when, paradoxically, bank credit is becoming increasingly complex and difficult and therefore, to score a significant influence on the economy and investment financing, and regardless of the existing liquidity abundance, establishing and developing Private Equity/Venture Capital Funds (PE/VC) can play an important contributioninthis regard. Despite the fact that such type of institutional investor is currently lacking within the Albanian capital market, some basic legal, institutional and economic premises do exist within the Albanian financial landscape, and which could provide grounds for such an actor to play its role in providing an alternative source of long - term financing for Albanian businesses. Consequently, their existence could pave the way for revitalization of the idea and attempts to put into operation a functioning capital market in Albania, which is still rudimentary and non-active.

Does the research meeting affect the shareholding ratio of institutional investors in listed companies? Empirical evidence from China

PurposeThis paper discusses whether institutional investors change the shareholding ratio of listed companies through research meeting, and whether this active investment mode can really improve the investment efficiency of institutional investors.Design/methodology/approachUsing empirical research method, this study designs and conducts an empirical research according to empirical research's basic norms. Thus, we acquire needed and credible empirical data. This study analyzes whether institutional investors seek their private interest in researched companies by analyzing their research meetings and the shareholding ratios of different types of institutional investors using Shenzhen Stock Exchange data on listed firms from 2014 to 2018.FindingsThis study finds that the research meetings of institutional investors provide participants with reliable information which supports the decision of institutional investors to change their shareholding ratio. The stock price growth rate strengthens the positive correlation between the research meetings of institutional investors and the shareholding ratio of institutional investors. Additionally, transactional institutional investors increase the shareholding ratio, while holding institutional investors do not.Originality/valueThis paper combines the behavior of institutional investors with the holding status of institutional investors, and discusses the impact of institutional investors' behavior on investment decisions. At the same time, it classifies the institutional investors and discusses the attitude of different types of institutional investors towards this active investment mode.

Determinants of commitment and opportunism of institutional investors’ behaviour: an empirical investigation on Robo-voting Phenomenon

Purpose of the paper: Recent research identifies a troubling number of institutional investors that automatically follow the advice of their proxy advisors so that they can prove to have complied with their fiduciary duties in a practice known as robo-voting. Therefore, our central research questions are: How could the characteristics of institutional investors affect robo-voting phenomenon? How could robo-voting phenomenon favour the creation of new opportunistic behaviour, changing the scope of shareholder engagement? Methodology: Our paper directly addresses these questions by using ANCOVA (Analysis of Covariance) to test the effect of characteristics of institutional investors on the dependent variable under study. We use a manually constructed sample of coverage information from 123 Annual General Meetings held by large Italian companies in the 4-year period 2015 to 2018 and the voting reports of three proxy advisors. Findings: We show that such voting based on robo-voting phenomenon is restricted to specific types of institutional investors and it may be highlighted as a negative aspect of a duty to ‘demonstrate’ engagement on the part of institutional investors. Specifically, this duty could depend on location, strategy and category of institutional investors. Research limits: We refer only to the Italian market and it may be considered as a peripheral market by investors. Practical implications: We argue that legal enforcement of the conceptual and operational spectrum of engagement duties currently sits uncomfortably upon institutional investors and proxy advisors. Originality of the paper: We think it is important to consider how to promote shareholder engagement in general in a European context and at the same time curb negative activism by some shareholders.