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

58 Pages Posted: 9 Apr 2019 Last revised: 5 Aug 2020

See all articles by Ivalina Kalcheva

Ivalina Kalcheva

University of Texas at San Antonio - Department of Finance

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: July 26, 2020

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 (July 26, 2020). Claremont McKenna College Robert Day School of Economics and Finance Research Paper No. 3354203, Available at SSRN: https://ssrn.com/abstract=3354203 or http://dx.doi.org/10.2139/ssrn.3354203

Ivalina Kalcheva

University of Texas at San Antonio - Department of Finance

San Antonio, TX 78249
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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