Internalizing Governance Externalities: The Role of Institutional Cross-Ownership

He, Jie; Huang, Jiekun; Zhao, Shan

doi:10.2139/ssrn.2940227

Cited by 23 publications

(51 citation statements)

References 43 publications

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“…Prior research shows that institutional investors can influence firms through direct communications with top managers (McCahery, Sautner, & Starks, 2016). CIIs can also directly make shareholder proposals aimed at improving supply chain performance and integration (He, Huang, & Zhao, 2019). In addition, CIIs can nominate directors to the buyer-supplier pairs to mitigate supply chain frictions (Rubin, 2006).…”

Section: Introductionmentioning

confidence: 99%

Common institutional investors and supplier performance in supply chains

Cheung

Haw

et al. 2020

J of Ops Management

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We investigate how common institutional investors (CIIs) in supply chains affect supplier performance. Social network theory suggests that buyer–supplier relationships are influenced by networks of ties in which they are embedded. While prior research has concentrated on networks of trade interactions, we instead examine the influences of networks through common investors. Utilizing a large sample of buyer–supplier relationships, we find that the presence of CIIs improves suppliers' operating and market performance, especially for suppliers with greater dependence on buyers. In addition, supplier performance increases with the common ownership stakes held by CIIs, but decreases with the asymmetric ownership stakes of CIIs across supply chain partners. We find that better financial collaboration between the partners appears to be a mechanism through which CIIs enhance supplier performance. Lastly, we find that the role of CIIs in strengthening supplier performance is distinct from that of direct equity links. Collectively, our findings highlight a novel role of indirect cross‐ownership in fostering supply chain collaboration and coordinating vertical relationships and, in turn, improving supplier performance.

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Section: Introductionmentioning

confidence: 99%

Common institutional investors and supplier performance in supply chains

Cheung

Haw

et al. 2020

J of Ops Management

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“…More recently, the literature on proxy voting has explored other issues, in particular: i) whether mutual fund voting is driven by proxy advisers' recommendations, and if so why (Bethel and Gillan, 2002;Cai, Garner, and Walkling, 2009;Ertimur, Ferri, and Oesch, 2013;Larcker, McCall, and Ormazabal, 2014;Iliev and Lowry, 2015;Malenko and Shen, 2016;; ii) whether social networks-a common educational background between mutual fund managers and portfolio firms' CEOs-can explain mutual fund voting behavior (Butler and Gurun, 2012); whether index-investors are active in corporate governance (Appel, Gormley, and Keim, 2016); iv) whether cross-holdings in firms in the same industry affect the management-friendly stance of mutual funds (He, Huang, and Zhao, 2017), and; v) whether mutual funds vote in support of activist investor actions (He and Li, 2017;Brav, Jiang, and Li, 2017;Kedia, Starks, and Wang, 2017;and Jiang, Li and Mei, 2018). Finally, in a survey of mutual fund managers, McCahery, Sautner, and Starks (2016) find that voting against management is an important channel through which institutional investors exert their influence.…”

Section: Introductionmentioning

confidence: 99%

Investor Ideology

Bolton

Ravina

et al. 2018

SSRN Journal

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This paper analyzes the voting patterns of institutional investors from their proxy voting records. It estimates a spatial model of voting, using the W-NOMINATE scaling for voting in legislatures. We find that institutional investors' ideology (or ideal points) can be mapped onto a left-right dimension, just as legislators' ideologies can be represented along a left-right spectrum. The far-left investors are socially responsible investors and the far-right investors are "greedy" investors, those opposed to proposals that could financially cost shareholders. There are significant ideological differences across institutional investors and there is no shareholder unanimity. The proxy adviser Institutional Shareholder Services (ISS) plays a role similar to a political party. A second adviser, Glass Lewis, has fewer followers. We find that the ideology of ISS is centerleft, to the left of most institutional investors and Glass Lewis. Furthermore, Vanguard and Blackrock are center-right, and the ideology reflected in management proposals and voting recommendations is far to the right. Investors on the left support a more social orientation of the firm on environmental and other issues. They also support fewer executive compensation proposals.

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“…Literature about cross-holding in corporate finance is protracted and abundant (see Fedenia, et al, 1994, Adams, 1999, Suzuki, 2002, Clayton & Jorgensen, 2005, Trivedi & Young 2006, Elliott, et al, 2014, He, et al, 2019 From a financial stability perspective, literature acknowledges that cross-holding is particularly important to explain contagion. The key is the potential feedback effect created by firms' payoffs and value being dependent on claims on other firms.…”

Section: Cross-holding and Financial Stabilitymentioning

confidence: 99%

Securities cross-holding in the Colombian financial system: A topological approach

León¹,

Miguélez²

2020

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Cross-holding of securities in financial systems occurs when i) two financial institutions hold securities issued by each other or ii) more than two financial institutions hold securities issued by each other in a circular structure. Securities cross-holding is relevant for financial stability because they may further propagate and amplify shocks, therefore increasing the potential for contagion among interconnected financial institutions. We use a unique dataset of securities issued and held by financial institutions to measure the extent of securities cross-holding in Colombia. The dataset comprises bonds, certificates of deposit, and equity issued and held (in proprietary position) by financial institutions from 2016 to 2019. Results show that the extent of securities cross-holding in the Colombian financial system is particularly low-even when cross-holding across different types of securities is considered. The network topology suggests that potential contagion from securities cross-holding is rather limited.

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Internalizing Governance Externalities: The Role of Institutional Cross-Ownership

Cited by 23 publications

References 43 publications

Common institutional investors and supplier performance in supply chains

Common institutional investors and supplier performance in supply chains

Investor Ideology

Securities cross-holding in the Colombian financial system: A topological approach

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