Institutional Ownership and Firms’ Thrust to Compete

50 Pages Posted: 12 Feb 2018 Last revised: 11 Sep 2020

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: September 10, 2020

Abstract

This paper provides evidence on the impact of different types of 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 and immediate 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 thrust to compete, suggesting that firms respond to their preferences and competitive pressures for achieving short-term value creation. By contrast, we find that firms with greater ownership by non-transient institutional investors reduce their thrust to compete. Non-transient investors 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. The findings provide significant empirical insights to 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; Dedicated investors; Quasi-Indexers

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 (September 10, 2020). 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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
77
Abstract Views
697
rank
342,866
PlumX Metrics