Institutional Ownership and Firms’ Thrust to Compete

Forthcoming British Journal of Management

54 Pages Posted: 12 Feb 2018 Last revised: 3 Feb 2021

See all articles by Panayiotis C. Andreou

Panayiotis C. Andreou

Cyprus University of Technology

Franco Fiordelisi

University of Rome III - Department of Business Studies; Middlesex University - Business School

Terry Harris

Durham University Business School

Dennis Philip

Durham University - Department of Economics and Finance

Date Written: January 24, 2021

Abstract

This article provides evidence on the impact of transient (short-term) institutional investors on a firm’s thrust to compete. A firm’s thrust to compete, as an attribute of corporate culture, captures the relative importance of corporate values that push a firm to achieve shareholder value in the short-term by emphasizing goal achievement, fast response to external information, and enhanced competitiveness. We find that greater ownership by transient investors results in firms intensifying their future thrust to compete, suggesting that firms respond to these investors’ preferences and competitive pressures for achieving short-term value creation. In line with our expectations, this effect is not observed for firms with greater ownership by long-horizon institutional investors, who are incentivized to place their emphasis on long-term firm value, over short-term gains. Our findings reveal that the composition of institutional ownership influences the organizational culture of firms in a non-homogeneous way. As such, we provide significant empirical insights for the ongoing debate on the implications arising from the behind‐the‐scenes engagement of institutional investors with management.

Keywords: Thrust to compete; Corporate culture; Competing values framework; Institutional ownership; Transient investors; short-horizon investors

JEL Classification: G20, G32, G34, G38, M48

Suggested Citation

Andreou, Panayiotis C. and Fiordelisi, Franco and Harris, Terry and Philip, Dennis, Institutional Ownership and Firms’ Thrust to Compete (January 24, 2021). Forthcoming British Journal of Management, Available at SSRN: https://ssrn.com/abstract=3120677 or http://dx.doi.org/10.2139/ssrn.3120677

Panayiotis C. Andreou (Contact Author)

Cyprus University of Technology ( email )

School Of Management and Economics
P.O. Box 50329
Lemesos, 3036
Cyprus

HOME PAGE: http://www.pandreou.com

Franco Fiordelisi

University of Rome III - Department of Business Studies ( email )

Via Silvio D'Amico 77
Via Silvio D'Amico 77
Rome, RM 00145
Italy

HOME PAGE: http://host.uniroma3.it/docenti/fiordelisi/?home

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

Terry Harris

Durham University Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

Dennis Philip

Durham University - Department of Economics and Finance ( email )

Department of Economics and Finance
Mill Hill Lane
Durham, DH1 3LB
United Kingdom

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