Institutional investors' ownership stability and firms' innovation

Abstract

We examine the relationship between various measures of institutional ownership and investee firms' level of innovation as measured by the number of patents and patent citations. We find a direct association between the stability in the equity ownership of institutional investors and their investee firms' level of innovation. Our main finding would serve to reassure managers that they benefit from the support of long-term-oriented institutional investors who adopt a "buy and hold" investment philosophy as opposed to a "trading" philosophy. We also examine the association between the proportion of a firm's equity held by institutional investors and its innovation and find that it relies on the type of the investor. For instance, while there exists a positive association between mutual funds and firm innovation yet, the association is only positive for funds that actively manage their portfolios different from their benchmark index. Next, pressure-sensitive institutional investors' shareholdings are positively correlated with firm innovation; however, it is not necessarily the case for all the pressure-insensitive investors.

Corporate innovation and trade credit demand: Evidence from China

“…The main objective is to capture variations in the corporate innovation that are exogenous to trade credit demand. The growing body of literature predicts that institutional investors are more active to exert pressure for high corporate innovation (Sakaki & Jory, 2019; Xu et al, 2015); therefore, managers pay strict attention to increase corporate innovation to attract institutional investment. Consistent with this view, the presence of institutional investors can be accompanied by a contemporaneous incline in the corporate innovation and less correlated with the error term.…”

Does family ownership always reduce default risk?

“…Thus, it is during the crisis period that family owners and bank trusts align their interests, thereby reducing their conflicts and, consequently, default risk (0.007 vs. 0.032). The opposite occurs with institutional advisors, whose short‐term orientation and lack of other business ties to preserve (Sakaki and Jory, 2019) lead them into greater conflict with family owners during the crisis, thereby increasing default risk (0.038 vs. −0.012).…”

“…The likelihood of family owners' protection of non-economic goals leading to conflicts with institutional investors can increase under certain conditions. Firstly, as Sakaki and Jory (2019) point out, the involvement of institutional investors depends not only on the proportion but also on the stability of their holdings. Thus, institutional investors can be typified by their degree of portfolio diversification and the depth of their investment horizon.…”

Effectiveness of industry-university-research cooperation in China: impact of innovation input and open innovation environment

“…To avoid the systematic difference of innovation activities among industries, the industry scope of the sample is limited to the manufacturing industry. Considering the time lag of the R&D process and the possible endogenous problems in estimating, such as the time lag of patent application and authorization (Sakaki and Jory, 2019) and the time lag of commercialization of scientific and technological achievements, the definitions of the time lag length of relevant factors of IURC are different in the existing studies. To deal with this situation, this paper defines the length of time delay as three years, with little difference in time and region, thus avoiding the trend interference of policy and specific events on the development of R&D (Deng et al , 2019).…”