Institutional Investor Horizons, Information Environment, and Firm Financing Decisions

Nanyang Business School Research Paper No. 23-27

Journal of Contemporary Accounting & Economics, Forthcoming

69 Pages Posted: 19 Apr 2012 Last revised: 3 Apr 2024

See all articles by Xin Chang

Xin Chang

Nanyang Business School, Nanyang Technological University

Yangyang Chen

City University of Hong Kong (CityU) - Department of Accountancy

Kangkang Fu

Hong Kong Baptist University

Endong Yang

Faculty of Business Administration, University of Macau

Date Written: November 13, 2023

Abstract

We provide evidence that the investment horizons of institutional shareholders affect firms’ financing decisions. We find that short-term institutional ownership positively affects firms’ likelihood of equity relative to debt issues, the size of equity issues, and the likelihood of long-term relative to short-term debt issues. Firms held more by short-term institutions have lower financial leverage and longer debt maturities. These results suggest that short-horizon institutions, backed by buy-side research, improve the transparency of the information environment, which allows firms to issue more information-sensitive securities. Our findings suggest that institutional investor horizons influence firms’ financing decisions by shaping their information environment.

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

JEL Classification: G32, D82, G20

Suggested Citation

Chang, Xin and Chen, Yangyang and Fu, Kangkang and Yang, Endong, Institutional Investor Horizons, Information Environment, and Firm Financing Decisions (November 13, 2023). Nanyang Business School Research Paper No. 23-27, Journal of Contemporary Accounting & Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2042476 or http://dx.doi.org/10.2139/ssrn.2042476

Xin Chang

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

HOME PAGE: https://personal.ntu.edu.sg/changxin/

Yangyang Chen (Contact Author)

City University of Hong Kong (CityU) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Kangkang Fu

Hong Kong Baptist University ( email )

34 Renfrew Road
Wing Lung Bank Building for Business
Hong Kong
Hong Kong

Endong Yang

Faculty of Business Administration, University of Macau ( email )

Macau

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
783
Abstract Views
6,122
Rank
60,423
PlumX Metrics