Cross-Country Determinants of Institutional Investors’ Investment Horizons
24 Pages Posted: 29 Jun 2020 Last revised: 7 Mar 2023
Date Written: June 5, 2020
Using a large dataset of firms from 35 countries, we study the country-level determinants of institutional investors’ investment horizons around the world. We document that an equity investor-friendly institutional environment is more important for long-term investors, while short-term investors seem to be less concerned about the quality of the financial and legal environment. Beyond the financial and legal structure, the cultural environment and economic policy uncertainty in a country are other important determinants of investor horizons. These findings improve our understanding of cross-country differences in the corporate governance role, i.e., engagement vs. exit, of institutional investors.
Keywords: Institutional investors, investment horizons, churn rates, institutional environments
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