Does governance travel around the world? Evidence from institutional investors

Aggarwal, Reena; Erel, Isil; Ferreira, Miguel A.; Matos, Pedro

doi:10.1016/j.jfineco.2010.10.018

Cited by 1,312 publications

(788 citation statements)

References 56 publications

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“…Next, we split our sample into four regions: eastern, central, western, and north-eastern China, and examined each institutional investors' industrial favorite in each economic region. Notably, all institutional investors in China can be divided into two groups as previously reported in prior studies [6,10,32]. The first group includes independent institutional investors and grey institutional investors by identifying them based on whether the institutional investors have any business ties with the firm in which they invest.…”

Section: Methodsologymentioning

confidence: 99%

“…The literature can be divided into two categories. (1) exploring the firm performance [7,15,16,21,22] and ownership structure [1,7,22] that affect the investment behavior of institutional investors; and (2) investigating the impact of institutional investors on board decisions [10,[23][24][25][26][27], volatility of the firm's stock return [14,[28][29][30], and corporate governance [1,22,[31][32][33]. Firm performance and ownership structure are the two firm-level characteristics used in this study.…”

Section: Easternmentioning

confidence: 99%

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Sustainable Returns: The Effect of Regional Industrial Development Policy on Institutional Investors’ Behavior in China

Lin

Jun

et al. 2018

Sustainability

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Abstract:Within the market economy system controlled by the Chinese government, this study mainly explores whether government policies can sufficiently guide the investment decisions of professional investors. Thus, we examine whether professional investment institutions can support the government's policy for long-term investment to produce sustainable returns and create value for both the country and investment institutions. To perform this test, we use the annual data from firms held by institutional investors and listed in China A-shares to run a panel regression model. We then explore the following three issues: first, we examined whether firm-level characteristics or regional industrial development policy affect the investment behavior of the institutional investors. Second, we investigated whether four types of institutions have different favorite economic regions in China under the regional industrial development policy. Third, we analyzed which type of institutional investor supports the regional industrial development policy. The above four types of institutions are: independent, grey, domestic, and qualified foreign institutions. Empirical results show that both firm-level characteristics and regional industrial development policy can affect the investment behavior of the institutional owners. Of all the firm-level characteristics selected by institutions in China, return on equity (ROE) is the condition most commonly selected for all types of institutions, whereas the dividend yield (DY) is considered only by qualified foreign institutional investors (QFIIs). Notably, both independent and domestic institutions have the same firm selection criteria. As for the institutions' favorite industries for investment, only grey institutions prefer the power industry and QFIIs prefer manufacturing industry. In addition, all four types of institutional investors have different industrial favorites in the four economic regions in China under the regional industrial development policy. For example, independent institutions prefer the information industry and grey institutions appear to be interested in every industry. Moreover, domestic institutions prefer the manufacturing and information industries, whereas QFIIs prefer the manufacturing industry. Regarding the regional participation of institutions, both domestic institutions and QFIIs seem to focus on every region. Moreover, independent institutions focus on the eastern and western regions, whereas grey institutions only focus on the western region. Finally, domestic institutions received the greatest level of support, followed by grey and independent institutions, whereas the QFIIs receive the least support. Put simply, domestic institutions are deeply engaged in industrial development all over China, whereas QFIIs are only slightly engaged in this development.

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Section: Methodsologymentioning

confidence: 99%

Section: Easternmentioning

confidence: 99%

Sustainable Returns: The Effect of Regional Industrial Development Policy on Institutional Investors’ Behavior in China

Lin

Jun

et al. 2018

Sustainability

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show abstract

“…In addition, previous studies also find that institutional investors play an important role in the monitoring or governance of firms. For example, Aggarwal et al [27] note that increasing foreign intuitional ownership for a firm can help to solidify the corporate governance mechanism. Hutchinson et al [28] report that firm-specific risk, risk management policy, firm performance and institutional shareholdings are positively correlated.…”

Section: Variablesmentioning

confidence: 99%

Which Firm Characteristics Affect Foreign Analyst Coverage? Evidence from the Taiwan Stock Market

Wang¹

2018

JMF

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This study investigates the association between firm characteristics and foreign analyst coverage. Using a sample of 366 firms listed on the Taiwan Stock Exchange that were followed by foreign analysts from January 2006 to June 2012, I employ the finite Tobit regression mixture model to analyze which firm characteristics influence foreign analyst coverage. The results find that mixture model may express differential influences on analyst coverage based on the heterogeneity of firm characteristics in different subgroups. Price-tobook ratio, firm size, and institutional ownership are the important characteristic variables that influence foreign analyst coverage. Among them, price-tobook ratio and foreign analyst coverage may present an inverted U-shaped or a U-shaped correlation in different subgroups. Also, there is an endogenous relationship between foreign analyst coverage and foreign institutional ownership, and thus, the characteristics of target firms followed by foreign analysts resulting from changes in foreign institutional ownership cannot be ignored. Finally, I also find that large-sized firms with high institutional ownership and medium stock turnover rate have the highest probability of being followed by foreign analysts.

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“…The latter have been found by Ferreira and Matos (2008) to engage in monitoring firms worldwide and thus reduce agency risk. Aggarwal, Erel, Ferreira and Matos (2011) show that foreign institutional investors play an active role in improving corporate governance mechanisms and outcomes. An (2015) finds that foreign investors improve the reporting quality of Korean firms through their active monitoring role that mitigates managerial opportunism.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Stock Market Liberalisation and Cost of Equity: Firm-level Evidence from Malaysia

Foong¹,

Lim²

2016

AAMJAF

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Does governance travel around the world? Evidence from institutional investors

Cited by 1,312 publications

References 56 publications

Sustainable Returns: The Effect of Regional Industrial Development Policy on Institutional Investors’ Behavior in China

Sustainable Returns: The Effect of Regional Industrial Development Policy on Institutional Investors’ Behavior in China

Which Firm Characteristics Affect Foreign Analyst Coverage? Evidence from the Taiwan Stock Market

Stock Market Liberalisation and Cost of Equity: Firm-level Evidence from Malaysia

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