Institutional investment horizons and firm valuation around the world

• 成果类型: Article
• 署名作者: Doering, Simon; Drobetz, Wolfgang; El Ghoul, Sadok; Guedhami, Omrane; Schroeder, Henning
• 署名单位: University of Hamburg; University of Alberta; University of South Carolina System; University of South Carolina Columbia
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/s41267-020-00351-9
• 发表日期: 2021
• 页码: 212-244
• 关键词: institutional investors; investment horizon; Foreign investors; international corporate governance; Firm value

摘要

Using a comprehensive dataset of firms from 34 countries, we study the effect of institutional investors' investment horizons on firm valuation around the world. We find a positive relation between institutional ownership and firm value that is driven by short-horizon institutional investors. Accounting for the interaction between investors' investment horizon and nationality, we show that foreign short-horizon institutions, which are more likely to discipline managers through the threat of exit rather than engaging in monitoring made costly by the liability of foreignness, are the investor group with the strongest effect on firm value. Reinforcing the threat of exit channel, we find that the value-enhancing effect of short-horizon investors is stronger in the presence of multiple short-horizon investors, who are more likely to engage in competitive trading. The positive valuation effect of short-horizon investors is stronger when stock liquidity is high, which makes the exit threat more credible, and in firms prone to free cash flow agency problems. Overall, our results are consistent with short-horizon institutional investors, especially foreign institutional owners, affecting firm value by disciplining managers through a credible threat of exit.