Foreign institutional investment horizon and earnings management: Evidence from around the world

Mian, Rehman Uddin; Irfan, Saadia; Mian, Affan

doi:10.1016/j.irfa.2023.102509

Cited by 8 publications

(17 citation statements)

References 54 publications

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“…Because of data limitations, we do not consider other characteristics of FIIs associated with their monitoring effectiveness, such as their investment horizon, ownership threshold, economic motivation and institution type. In recent literature, it is revealed that, unlike short-term FIIs, investors characterized by longer investment horizons possess the capability to access and analyze monitoring information (Döring et al , 2021; Mian et al , 2023). Further research could therefore investigate whether the impact of FIIs on the value of excess cash holdings varies depending on investor characteristics and their interactions with investee firms.…”

Section: Discussionmentioning

confidence: 99%

“…Although the monitoring role of FIIs has been extensively investigated and recognized in the recent literature, there is a prominent view that not all institutional investors are homogenous concerning their abilities and incentives to monitor their portfolio constituents effectively (Döring et al, 2021;Ferreira and Matos, 2008;Mian et al, 2023). On this ground, one stream of literature groups FIIs based on the legal regime of their home countries.…”

Section: Foreign Institutional Monitoring and The Value Of Excess Cas...mentioning

confidence: 99%

“…Moreover, when estimating excess cash holdings in equation (1), we calculate the sales growth based on the preceding three years, limiting our sample period to 2007–2018. Moreover, we follow Bena et al (2017) and Mian et al (2023), and select countries with no significant foreign equity ownership restrictions. Other less-restrictive countries are not incorporated in the sample because of data limitations.…”

Section: Notesmentioning

confidence: 99%

“…A large body of evidence indicates that FIIs play a positive role in monitoring portfolio firms because of their vast governance experience and arm’s-length relationships. For instance, FIIs are found to be associated with enhanced valuation and performance (Ferreira and Matos, 2008), improvements in firm-level governance (Aggarwal et al , 2011; Mian and Nagata, 2015; Min and Bowman, 2015), higher corporate risk-taking (Nguyen, 2012; Boubakri et al , 2013), efficient investment decisions (Ferreira et al , 2010; Chen et al , 2017; Bena et al , 2017) and improved disclosures (Lel, 2019; Mian et al , 2023; Nagata and Nguyen, 2017).…”

Section: Introductionmentioning

confidence: 99%

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Foreign institutional investors and the value of excess cash holdings: international evidence

Ilyas,

Mian,

Mian

2023

IJAIM

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Purpose Using a comprehensive sample from developed and emerging economies, this study aims to examine whether foreign institutional investors (FIIs) enhance the value of excess cash by constraining the potential self-appropriating managerial propensity related to its inefficient utilization. Design/methodology/approach This study uses a large panel data set of firms from 32 non-US countries from 2007 to 2018. Using data from COMPUSTAT Global and S&P Capital IQ, this study uses ordinary least squares regression with year- and firm-fixed effects for the baseline analysis. In addition, two-stage least squares with instrumental variable regression and propensity score matching approaches were used to address the potential endogeneity. Findings This study shows that FIIs significantly increase the value of excess cash holdings. The authors also found that the positive impact of FIIs is more significant when investors come from common-law countries with better governance and investor protection. Furthermore, in countries and firms with weaker governance controls, the relationship between FIIs and the value of excess cash is stronger, consistent with the institutional monitoring hypothesis. Collectively, the findings imply that FIIs are advantageous to investees because they effectively promote the efficient deployment of corporate resources. Practical implications Collectively, the findings of this study imply that FIIs are advantageous to investees because they effectively promote the efficient deployment of corporate resources. Originality/value This study offers new evidence on how FIIs impact the value of excess cash in an international setting. In addition, it highlights the significance of the legal origin of institutional investors’ home country and the governance quality of host countries and investee firms in influencing the effect of foreign institutional monitoring on the value of excess cash.

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Section: Discussionmentioning

confidence: 99%

Section: Foreign Institutional Monitoring and The Value Of Excess Cas...mentioning

confidence: 99%

Section: Notesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Foreign institutional investors and the value of excess cash holdings: international evidence

Ilyas,

Mian,

Mian

2023

IJAIM

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“…Next, by following Mian et al (2023) to address the sample selection bias, we split our overall sample into two halves, based on their proportion in the full dataset. Notably, over 74 % of firm-year observations (122,749) originate from China, India, Japan, Korea, Taiwan and USA.…”

Section: Additional Analysismentioning

confidence: 99%

Impact of Financial Reporting Quality on Investment Efficiency Around the Globe

Khan

2024

2024: Proceedings of Social Science and Humanities Research Association (SSHRA)

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In developed markets, the documented enhancement of investment efficiency due to financial reporting quality has yet to address the question of whether such a correlation persists in emerging, frontier, and diverse markets. This study investigates the association between financial reporting quality and investment efficiency across 21,741 publicly listed firms spanning 36 countries worldwide, encompassing developed, emerging, frontier, and other markets. Comprehensive accounting data spanning the years 2000 to 2022 is gathered for all listed firms in 40 industries across these 36 countries having 166,453 firms-year observations. Causal connections are examined through fixed-effect regression analysis, supplemented by additional tests and robustness checks utilizing alternative proxies. Concerns about endogeneity are mitigated through 2SLS analysis. The results reveal a positive impact of financial reporting quality on investment efficiency for firms in developed, emerging, frontier, and other markets. Our exploration of both over-investment and under-investment scenarios demonstrates a more pronounced link between financial reporting quality and investment efficiency in the underinvestment scenario. These findings contribute to the existing body of evidence, indicating that beyond its influence on investment efficiency in developed markets, the relationship between financial reporting quality and investment efficiency holds true globally. This encompasses emerging, frontier, and other markets, characterized by varying levels of reporting quality and financial frameworks.

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Supervision by Distracted Institutional Investors and Majority Shareholder Tunnelling: Causal Evidence from China

Lin,

Ding

2024

Asia-Pac Financ Markets

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Foreign institutional investment horizon and earnings management: Evidence from around the world

Cited by 8 publications

References 54 publications

Foreign institutional investors and the value of excess cash holdings: international evidence

Foreign institutional investors and the value of excess cash holdings: international evidence

Impact of Financial Reporting Quality on Investment Efficiency Around the Globe

Supervision by Distracted Institutional Investors and Majority Shareholder Tunnelling: Causal Evidence from China

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