Institutional Ownership and Investment by Private Companies

64 Pages Posted: 6 Feb 2022 Last revised: 24 Jun 2022

See all articles by Seth Armitage

Seth Armitage

University of Edinburgh - Accounting and Finance

Ronan Gallagher

University of Edinburgh - Edinburgh Business School

Jiaman Xu

University of Edinburgh - Accounting and Finance Group

Date Written: June 24, 2022

Abstract

We examine the impact of institutional shareholders on the investment activity and financing constraints of established private companies. Our sample of institutional owners is derived from company share registers and is comprehensive regarding type of institution and size of equity stake. Institutions give rise to higher levels of investment in intangible assets—but not in tangible assets—and higher levels of external finance. The effects are largest for companies with minority institutional stakes, suggesting that constraint alleviation is a primary motive for ownership in private companies without taking control. Institutions have more impact on external equity financing than debt financing.

Keywords: corporate investment, funding constraints, private companies, private equity, investing institutions

JEL Classification: G24, G23, G32

Suggested Citation

Armitage, Seth and Gallagher, Ronan and Xu, Jiaman, Institutional Ownership and Investment by Private Companies (June 24, 2022). Available at SSRN: https://ssrn.com/abstract=3985039 or http://dx.doi.org/10.2139/ssrn.3985039

Seth Armitage (Contact Author)

University of Edinburgh - Accounting and Finance ( email )

29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom
44 131 650 3794 (Phone)

Ronan Gallagher

University of Edinburgh - Edinburgh Business School ( email )

29 Buccleuch Pl
Edinburgh, Scotland EH8 9JS
United Kingdom

Jiaman Xu

University of Edinburgh - Accounting and Finance Group ( email )

Business School
University if Edinburgh
Edinburgh, Scotland EH8 9JS
United Kingdom

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