Abstract

http://ssrn.com/abstract=2042476
 


 



Institutional Investor Horizons, Information Environment, and Firm Financing Decisions


Xin (Simba) Chang


Nanyang Business School

Yangyang Chen


Monash University - Department of Accounting and Finance; Financial Research Network (FIRN)

Sudipto Dasgupta


Hong Kong University of Science & Technology - Department of Finance

April 19, 2012

25th Australasian Finance and Banking Conference 2012

Abstract:     
We provide evidence that investment horizons of institutional shareholders affect firms’ financing decisions. We find that more short-term institutional ownership increases the likelihood of equity issues relative to debt issues, the size of equity issues, and the likelihood of long-term debt issues relative to short-term debt issues. These results suggest that short-horizon institutions, backed by buy-side research, improve the transparency of the information environment (e.g., through informed trading and monitoring via 'exit'), which allows firms to issue securities that are more sensitive to information asymmetry. Furthermore, short-horizon institutional ownership has stronger effects on firms’ financing decisions when sell-side analyst coverage is lower, indicating that buy-side information production substitutes for sell-side coverage when the latter becomes scarcer. Our results are robust to endogeneity of institutional ownership.

Number of Pages in PDF File: 64

Keywords: investor horizons, information asymmetry, capital structure, debt maturity, institutional ownership

JEL Classification: G32, D82, G20

working papers series


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Date posted: April 19, 2012 ; Last revised: September 30, 2012

Suggested Citation

Chang, Xin (Simba) and Chen, Yangyang and Dasgupta, Sudipto, Institutional Investor Horizons, Information Environment, and Firm Financing Decisions (April 19, 2012). 25th Australasian Finance and Banking Conference 2012. Available at SSRN: http://ssrn.com/abstract=2042476 or http://dx.doi.org/10.2139/ssrn.2042476

Contact Information

Xin Chang
Nanyang Business School ( email )
S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore
HOME PAGE: http://www.ntu.edu.sg/home/changxin
Yangyang Chen (Contact Author)
Monash University - Department of Accounting and Finance ( email )
W1016, Building 11, Monash Uni. Clayton Campus
Clayton, Victoria 3800
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Sudipto Dasgupta
Hong Kong University of Science & Technology - Department of Finance ( email )
Clear Water Bay, Kowloon
Hong Kong
852-2358-7666 (Phone)
852-2358-1749 (Fax)
Feedback to SSRN


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