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Author: Darin G. Clay
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
Institutional shareholdings have a systematically positive effect on firm value and alter the Morck, Shleifer, and Vishny (1988) finding of a nonmonotonic relation between insider ownership and value. The evidence indicates that, on average, a 1% increase in institutional stock ownership translates to a 0.6% increase in the firm's market-to-book ratio, or an increase of $125M for the mean firm in cross-sectional analysis. Controlling for institutional holdings converts the original MSV finding - that firm value first increases with stock ownership by the board, then decreases, and then increases again - to one in which firm value uniformly increases with greater board ownership. These findings support the view that increased incentives for monitoring both by the board and by institutional investors consistently leads to higher company value. The evidence also indicates that the positive relation between institutional holdings and firm value is stronger in firms with higher discretionary cash flows and in the period following the 1992 adoption of proxy rule amendments that increased the bargaining power of institutions.
Author: Darin G. Clay
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
Institutional shareholdings have a systematically positive effect on firm value and alter the Morck, Shleifer, and Vishny (1988) finding of a nonmonotonic relation between insider ownership and value. The evidence indicates that, on average, a 1% increase in institutional stock ownership translates to a 0.6% increase in the firm's market-to-book ratio, or an increase of $125M for the mean firm in cross-sectional analysis. Controlling for institutional holdings converts the original MSV finding - that firm value first increases with stock ownership by the board, then decreases, and then increases again - to one in which firm value uniformly increases with greater board ownership. These findings support the view that increased incentives for monitoring both by the board and by institutional investors consistently leads to higher company value. The evidence also indicates that the positive relation between institutional holdings and firm value is stronger in firms with higher discretionary cash flows and in the period following the 1992 adoption of proxy rule amendments that increased the bargaining power of institutions.
Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher: International Monetary Fund
ISBN: 9781589062368
Category : Business & Economics
Languages : en
Pages : 204
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Book Description
This September 2003 issue of the Global Financial Stability Report highlights that since March 2003, further progress has been made in addressing the lingering effects of the bursting of the equity price bubble. Household and corporate balance sheets have continued to improve gradually and corporate default levels have declined. Companies in mature markets have cut costs, enhancing their ability to cope with slower growth and other potential difficulties. Corporations—particularly in the United States—have made good progress in their financial consolidation efforts and are in a better financial position to increase investment spending.
Author: Florian M. Muenkel
Publisher:
ISBN:
Category :
Languages : en
Pages : 97
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Book Description
In the first chapter I investigate the effect of the dispersion of institutional shareholders on firm value. By using mergers of institutional investors as exogenous changes to the ownership structure of firms in their portfolios I find that institutional investor monitoring is a complement to monitoring by other institutional investors. Concentration of institutional ownership is negatively related to firm value. The average cumulative abnormal return over an 11-day window around the merger announcement is 69 basis points lower for firms that experience an increase in institutional ownership concentration than for firms whose ownership structure is unaffected. My findings are consistent with Edmans and Manso (2011) which shows that multiple small shareholders can be more effective monitors than few large shareholders. Besides shedding light on the relation between institutional ownership and firm value my results have implications on the use of institutional ownership variables in corporate governance research, in general. The second chapter is joint work with my co-authors Henrik Cronqvist and Stephan Siegel. We investigate the question of what explains variation across individuals in homeownership and home location choices. We address this question by decomposing the variation in individuals' choices into (i) a genetic factor, (ii) parental influence, and (iii) individual-specific environmental factors. We find that variation across individuals in their decisions to own or rent has a strong genetic component, while parental influence seems to not affect that choice once we control for socioeconomic characteristics. Furthermore, conditional on homeownership, the amount of housing individuals consume is also attributable to important genetic factors. Our findings contribute to a deeper understanding of the factors that explain individual behavior with respect to the housing market, and add to an expanding literature on the biological and genetic factors that influence individuals' economic and financial decisions.
Author: Yordying Thanatawee
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
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Book Description
Despite the crucial roles of institutional investors in corporate governance mechanisms, there is little empirical evidence regarding the impact of institutional ownership on firm value in Thailand. This paper examines the relationship between institutional shareholdings and firm value in a sample of 1,451 observations from 323 non-financial firms listed on the Stock Exchange of Thailand (SET) over the period 2007 to 2011. After controlling for firm characteristics and endogeneity problems, the evidence indicates that equity ownership by domestic institutional investors has a positive impact on firm value while higher foreign institutional ownership is associated with lower corporate value. The findings suggest that domestic institutional investors provide effective monitoring roles, thereby increasing corporate governance and firm value, whereas foreign institutional investors are inactive in monitoring the managers and may even expropriate corporate resources at the expense of minority shareholders.
Author: William W. Jennings
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
Whether institutional investors monitor corporations and improve firm value is a key question for corporate governance and investment management. I find little empirical support for the hypothesis that institutions undertake monitoring that increases firm quality and valuation. Granger causation tests show that while quality firms do attract institutional investment, institutions do not monitor and firm value subsequently declines. Instead, institutional incentives are critical; some institutions with strong incentives to monitor do, indeed, monitor. Institutions with concentrated portfolios successfully monitor while institutions with a larger percentage stake do not. Pensions and endowments are better monitors than insurers, banks and mutual funds.
Author: Yusheng Cen
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this thesis, I analyze the roles of different institutional investors and how they affect firm performance based on a global dataset of 31 countries (regions) from 2007 to 2016. Breaking down institutions by geographic information (domestic or foreign) and type (such as mutual fund or pension funds), I first find that all institutions share preference for large firms, firms that experienced negative stock returns, and firms with lower leverage and high liquidity. I also find that various types of institutional investors affect firms' operating performance differently. The relation is convex for foreign institutions, while the opposite is true for domestic institutions. This indicates that foreign institutional investors exert better corporate governance when ownership is high, while domestic institutions are subject to business ties with firms when they hold substantial amounts of voting rights. Further analysis reveals a U-shaped relationship between firms' operating performance and the ownership level of investment advisors/bank trusts/pension funds, indicating a monitoring effect with high levels of ownership. However, mutual funds exhibit a concave influence on firm value, signifying negative impact of business ties when ownership is high. The findings for other types of institutions (hedge fund and insurance companies) are inconclusive.
Author:
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 32
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Book Description
Author: OECD
Publisher: OECD Publishing
ISBN: 9264116052
Category :
Languages : en
Pages : 78
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Book Description
This report reflects long-term, in-depth discussion and debate by participants in the Latin American Roundtable on Corporate Governance.
Author: Reena Aggarwal
Publisher: World Bank Publications
ISBN:
Category : Foreign exchange
Languages : en
Pages : 47
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Book Description
Author: Yong Seung Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
The impact of corporate governance on firm value has been extensively debated by academics and business practitioners. Some studies show that companies that allow minority shareholders to have more control are likely to create greater shareholder value than those firms with concentrated control, while other studies suggest that the impact of having democratic governance is either negligible or even negative. In developed countries institutional investors have a significant stake in most of the companies. Active engagement by institutional investors is expected to decrease agency costs by strengthening monitoring mechanisms of operations and performance evaluations of the management, resulting in an increase in firm value. However, some academics and business practitioners argue that such minority shareholders' active engagement could be detrimental to firm value. In this thesis, I study the influence of institutional investors' active shareholder engagement on firm value and the relationship between the characteristics of corporate governance and firm value of target companies. I review previous studies that have evaluated both the effect of corporate governance and of institutional investors' activism on firm value. I conduct empirical analyses to examine the relationship between the institutions' shareholder engagement and firm value.
