Institutional Investment and the Changing Role of Public Equity Markets: International Evidence

49 Pages Posted: 9 Apr 2019

See all articles by Ivalina Kalcheva

Ivalina Kalcheva

University of California, Riverside

Janet Kiholm Smith

Claremont McKenna College - Robert Day School of Economics and Finance

Richard L. Smith

University of California, Riverside - Anderson Graduate School of Management

Date Written: March 17, 2019

Abstract

We study the relation between institutionalization of capital and the reliance on public markets. Evidence indicates that for developed and developing countries capital under institutional management (mutual funds, pension funds, and insurance companies) is negatively related to the number of publicly listed companies, aggregate market capitalization, and trading volume on public markets. The negative relationships are stronger for more highly developed countries, and potentially strong enough to result in absolute listings declines in countries such as the United States. The results indicate that, as direct ownership of equity by retail investors declines, financial systems become less public-market-centric and more institution-centric.

Keywords: Mutual funds, Pension funds, Public listings, Trading volume, Market capitalization Institutional investors, Financial liberalization, Economic development

JEL Classification: G15, G18, G23, 016, O19, O43

Suggested Citation

Kalcheva, Ivalina and Smith, Janet Kiholm and Smith, Richard L., Institutional Investment and the Changing Role of Public Equity Markets: International Evidence (March 17, 2019). Available at SSRN: https://ssrn.com/abstract=3354203 or http://dx.doi.org/10.2139/ssrn.3354203

Ivalina Kalcheva

University of California, Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

Janet Kiholm Smith

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-3276 (Phone)

Richard L. Smith (Contact Author)

University of California, Riverside - Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
951-827-3554 (Phone)

HOME PAGE: http://www.agsm.ucr.edu/

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