Abstract

http://ssrn.com/abstract=2042476
 
 

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Institutional Investor Horizons, Information Environment, and Firm Financing Decisions


Xin (Simba) Chang


Cambridge Judge Business School; Nanyang Business School

Yangyang Chen


Hong Kong Polytechnic University - Faculty of Business; Financial Research Network (FIRN)

Sudipto Dasgupta


Hong Kong University of Science & Technology (HKUST) - 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


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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
Cambridge Judge Business School ( email )
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
HOME PAGE: http://sites.google.com/site/simbachangxin/
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)
Hong Kong Polytechnic University - Faculty of Business ( email )
9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China
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 (HKUST) - 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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