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Book part
Publication date: 31 December 2013

Krishna Reddy and Andrea Bather

Purpose – The global surge in institutional investors in the past decade or so has aroused interest in the role institutions play, or should play, in regard to the…

Abstract

Purpose – The global surge in institutional investors in the past decade or so has aroused interest in the role institutions play, or should play, in regard to the monitoring of the company financial performance. This study explores the nature of the relationship that exists between institutional ownership, corporate governance, and company financial performance.

Methodology/approach – Using Ordinary Least Squares (OLS) regression technique on 391 company-year observations between 2005 and 2010 to examine the nature of the relationship that exists between firm performance (PER) and ownership variables, and test whether this relationship is significant.

Findings – Our evidence provides support for the view that top five institutional shareholders take a longer-term view and are more involved with governance suggesting that the size of shareholdings has an effect when it comes to monitoring managerial decisions.

Research limitations/implications – Due to the small sample size, caution should be exercised when interpreting the results of this study. Also, it is to be noted that this study is based on a small country with an open capital market where there is high proportion of institutional ownership.

Practical implications – The results provide useful insights into the role different types of institutional investors play in terms of enhancing both governance and firm performance. Our analyses suggest that in mitigating principal-agent conflicts, size of ownership has an influence.

Originality/value of chapter – Our study adds to the literature by focusing on the role institutional investors’ play in New Zealand. Our study adds to the theory by showing that ownership type is important for mitigating agency conflicts.

Details

Institutional Investors’ Power to Change Corporate Behavior: International Perspectives
Type: Book
ISBN: 978-1-78190-771-9

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Book part
Publication date: 27 September 2011

Najah Attig, Sadok El Ghoul and Omrane Guedhami

Purpose – Study the impact of the heterogeneity of institutional investors, evident in their investment horizon, on firm credit ratings.Methodology/approach – Use a large…

Abstract

Purpose – Study the impact of the heterogeneity of institutional investors, evident in their investment horizon, on firm credit ratings.

Methodology/approach – Use a large sample of U.S. firms over the period from 1985 to 2006 (20,670 U.S. firm-year observations) to empirically investigate the relationship between institutional investment horizon and firm credit ratings. Test whether institutional investors with long-term investment horizon are associated with important monitoring and informational roles and thus higher credit ratings.

Findings – Stable shareholdings and relationship investing of institutional investors contribute to their monitoring and informational roles and result in higher firm credit ratings. Namely, ownership stakes of long-term institutional investors are associated with higher firm credit ratings than those of short-term institutional investors. In addition, the predominance and number of institutional investors with a long-term investment horizon affect firm's agency costs and information quality.

Social implications – Institutional monitoring incentives seem to be susceptible to the heterogeneity of institutional investors. The results point to the benefits of the long-term investment horizon of institutional investors (beyond their shareholdings) that seem to be associated with more efficient monitoring and thus reduced managerial myopia and opportunism.

Originality/value of the chapter – This is the first work to provide evidence on the extent to which the heterogeneity of institutional investors, evident in their investment horizon, alters firm's credit ratings.

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Institutional Investors in Global Capital Markets
Type: Book
ISBN: 978-1-78052-243-2

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Article
Publication date: 2 March 2015

Laura de Zwaan, Mark Brimble and Jenny Stewart

Environmental, social and governance (ESG) risks have the potential to negatively impact financial returns, yet few superannuation funds integrate these considerations…

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Abstract

Purpose

Environmental, social and governance (ESG) risks have the potential to negatively impact financial returns, yet few superannuation funds integrate these considerations into their investment selection. The Cooper Review (2010) identified a lack of member demand as a key impediment to ESG investing by superannuation funds. Given this problem, the aim of this study is to explore superannuation fund members’ perceptions of ESG investing by their funds in order to identify reasons for the lack of demand.

Design/methodology/approach

An on-line survey was developed and distributed to assess possible reasons why members do not select ESG investment options. In total, 549 Australian superannuation fund members responded to the survey.

Findings

Results indicate that the majority of superannuation fund members are interested in ESG investing. Members lack awareness of their fund’s approach to ESG investing, and they do not perceive there to be a financial penalty from ESG investing. Finally, members show a preference for consideration of governance issues over both social and environmental issues.

Research limitations/implications

Respondents are well educated and the majority did not choose their superannuation fund. There was no measure of financial literacy included in the research instrument. There is also a general limitation in surveying superannuation fund members when they lack knowledge about superannuation.

Practical implications

The results indicate that superannuation members are interested in both superannuation and ESG investing. Given the low take-up of ESG investment options, this finding raises the question of how effectively funds are engaging their members.

Social implications

The results should be of interest to superannuation funds and may lead to renewed interest in promoting ESG products.

Originality/value

This is the first study to examine superannuation members’ attitudes and behaviours towards ESG investing in the context of superannuation. The study also adds to our understanding of member decision-making in the $1.8 trillion superannuation industry.

Details

Sustainability Accounting, Management and Policy Journal, vol. 6 no. 1
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 22 July 2021

Siyue Chen, Gengzhi Huang, Hongou Zhang, Yuyao Ye and Qitao Wu

Institutional factors play an important and complex role in Chinese outward foreign direct investment (OFDI) location choices that do not seem to be influenced by a host…

Abstract

Purpose

Institutional factors play an important and complex role in Chinese outward foreign direct investment (OFDI) location choices that do not seem to be influenced by a host country’s high political risks. Moreover, the location choice for OFDI is key to corporate strategic decision-making on internationalization. Therefore, this study aims to examine the direct investments of Chinese multinational enterprises (MNEs) in Laos.

Design/methodology/approach

Combining the purposive sampling strategy and snowball sampling method, the authors interviewed nine market- and resource-seeking Chinese enterprises in Laos. Drawing from the mainstream eclectic paradigm and the theory of new institutional economics, the authors analyzed two key variables – enterprise investment motivation and enterprise heterogeneity.

Findings

Chinese MNEs are not insensitive to the regressive institutional quality of host countries; the relationship effect and institutional distance are the location decision pathways along with which institutional factors influence Chinese multinationals’ investments in Laos; political stability is necessary for Chinese-funded enterprises to invest in Laos and the degree of corruption is an overestimated institutional preference factor.

Originality/value

The relationship effect is introduced into the analysis framework as an intermediate variable that influences the decision of MNEs to invest in countries with underdeveloped institutions. It verifies the significant roles of bilateral political relations and network relations in the OFDI location decisions of state-owned and private enterprises, respectively.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 14 no. 3
Type: Research Article
ISSN: 1754-4408

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Book part
Publication date: 11 November 2014

Wiboon Kittilaksanawong

This research seeks to understand how shareholder constituencies including controlling family, nonfamily insiders, as well as domestic and foreign institutions in the…

Abstract

Purpose

This research seeks to understand how shareholder constituencies including controlling family, nonfamily insiders, as well as domestic and foreign institutions in the corporate governance system of emerging economy firms perceive institutional risks in terms of regulative, normative, and cognitive institutions and influence strategic choices in the internationalization of their invested firms.

Design/methodology/approach

The sample data are Taiwanese publicly listed companies in the electronics and computer industry. Panel data of the parent firms and their overseas affiliates are available from the annual report and Taiwan Economic Journal database. Country-level data are available from the World Investment Report and the IMD World Competitiveness Report. Statistical regression models including tobit and logistic regression are used to analyze the data.

Findings

Controlling family and nonfamily insider shareholders tend to influence their invested firms to enter in institutionally smaller host countries through a shared ownership. Domestic institutional shareholders tend to influence their invested firms to adopt a shared ownership and enter in host countries with larger and smaller institutional distances in terms of regulative and normative institution, respectively. Foreign institutional shareholders tend to influence their invested firms to enter in institutionally smaller host countries through a whole ownership.

Originality/value

The strategic choices of foreign market entry made by emerging economy firms are significantly shaped by the different risk perceptions of shareholder constituencies in their corporate governance system toward the institutional distances between the home and the host country.

Details

Emerging Market Firms in the Global Economy
Type: Book
ISBN: 978-1-78441-066-7

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Case study
Publication date: 20 January 2017

Richard B. Evans and Rick Green

Towers Watson (TW) has always conducted its own research into alternative approaches to market cap investing. A senior investment consultant with TW, impressed by a recent…

Abstract

Towers Watson (TW) has always conducted its own research into alternative approaches to market cap investing. A senior investment consultant with TW, impressed by a recent presentation by the CIO of Research Affiliates (RA) about an innovative investing concept called the “Fundamental Index methodology,” thinks it might be an important innovation in applying nonmarket cap approaches. But he has some concerns about the approach and whether or not it would be appropriate for TW's clients who depend on the firm to keep them on the cutting edge of institutional investing.

Details

Darden Business Publishing Cases, vol. no.
Type: Case Study
ISSN: 2474-7890
Published by: University of Virginia Darden School Foundation

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Article
Publication date: 16 March 2021

Rishika Nayyar, Jaydeep Mukherjee and Sumati Varma

The purpose of the paper is to examine the role of institutional distance as a determinant of outward foreign direct investment (OFDI) from India. The study combines a…

Abstract

Purpose

The purpose of the paper is to examine the role of institutional distance as a determinant of outward foreign direct investment (OFDI) from India. The study combines a nuanced view of institutional distance, with traditional location factors to analyze Indian OFDI flows to developed and emerging economies (EEs) during the period 2009 to 2017.

Design/methodology/approach

The paper employs fixed effects panel regression model on an unbalanced panel data set.

Findings

The findings suggest that India's OFDI is undeterred by the isomorphic pressures caused by regulatory and normative institutional distance, but cognitive institutional distance acts as a deterrent in developed economies. Indian MNEs engage in institutional arbitrage as they simultaneously engage in strategies of institutional escapism and institutional exploitation. The study also finds that emerging economies have emerged as an important destination for strategic asset seeking FDI, in addition to developed economies.

Practical implications

The findings of the study present important implications for policymakers and corporate managers. For policymakers, the study points toward the need for improving the general business environment at home to prevent escapist OFDI and trade enhancement as a tool to overcome cognitive barriers and behavioristic stereotypes. For corporate managers, the study's findings underline the importance of adopting different strategies for dealing with different isomorphic pressures in developed and emerging economies.

Originality/value

The study adds value to the sparse literature using the IBV in the emerging markets context, to supplement and enrich existing theoretical frameworks. It is a pioneering study in its use of institutional distance as an explanatory factor for Indian OFDI and provides evidence of institutional arbitrage.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 19 June 2020

Mohd Ariff Mohd Daud, Saiful Azhar Rosly and Zulkarnain Muhamad Sori

The purpose of this study is to explore potential fund-raising option that can be developed to attract investment in affordable housing initiatives in Malaysia. In doing…

Abstract

Purpose

The purpose of this study is to explore potential fund-raising option that can be developed to attract investment in affordable housing initiatives in Malaysia. In doing so, the study undertakes to discuss the viability of the property trust fund structure as an investment vehicle.

Design/methodology/approach

The study uses a qualitative design that involves the use of semi-structured questionnaires as a data collection strategy. A total number of ten experts were selected for the interview using critical case sampling scheme based on the purposive sampling strategy.

Findings

The study discovers that a dynamic fund structure – one that allows for the fund to evolve with changing circumstances and needs – can be adopted. This fund structure comprises a fund that can be initially established as a closed-ended fund. Then, with sufficient track record, the fund can be transformed into a public real estate investment trust, with the prospect of tapping into capital market via issuance of sukuk in the future. The fund can also adopt mezzanine structure of funding, which may reduce investors’ risks with minimal government intervention.

Research limitations/implications

The findings of this study illustrate the potential of fund-raising options from the perspective of institutional investors and regulators. Future research could explore government’s view and focus on the policy options.

Practical implications

The findings may provide valuable insight into alternative fund-raising options for affordable housing projects for policymakers and investment banks.

Social implications

The fund-raising options incorporate minimal government participation yet pose low risks to investors, creating a low-risk asset suitable for social investment.

Originality/value

This study outlines the mechanism to increase affordable housing supply in the market, by attracting institutional investors to invest in this dynamic fund structure initiative. As there are limited discussions on attracting funding for affordable housing developments, it is hoped that this paper will spark further debate and discussion among the academicians and policymakers.

Details

International Journal of Housing Markets and Analysis, vol. 14 no. 2
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 2 November 2015

Hairul Azlan Annuar

The purpose of this paper is to ascertain whether different types of institutional investor in Malaysia are involved in the corporate governance of their investee…

Abstract

Purpose

The purpose of this paper is to ascertain whether different types of institutional investor in Malaysia are involved in the corporate governance of their investee companies, and, if yes, to what extent is the level of the involvement.

Design/methodology/approach

A qualitative approach, consisting of a series of interviews with 18 senior investment managers of different types of institutional investor, was chosen.

Findings

The findings suggest that lessons learnt from the fallout of the Asian crisis has made Malaysian institutional investors not only to be more prudent in managing their total funds and in making equities investment decisions, but has resulted in a more active participation in their “core” investee companies apart from merely discharging their voting rights. Interview analysis revealed that government-linked investment companies are championing the cause and could possibly affect the overall level of institutional investors’ involvement, which bode well for the future of the corporate governance system of the country.

Research limitations/implications

Generalisations may be an issue when interviews are used as the method of inquiry. Also, the sample is not random, as access to many managers depended on recommendations. In addition, respondents were consciously selected to obtain different types of institutional investors that included government and non-government linked.

Originality/value

There is a lack of work on studying the involvement of institutional investors in developing countries, whereby previous work and literature review were predominantly based upon the experience of Western economies.

Details

Journal of Accounting & Organizational Change, vol. 11 no. 4
Type: Research Article
ISSN: 1832-5912

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Article
Publication date: 1 March 1985

Christopher L. Pass and Stephen F. Witt

Previous articles have demonstrated the extent to which financial institutions have come to own a growing proportion of ordinary shares in industrial and commercial…

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11017

Abstract

Previous articles have demonstrated the extent to which financial institutions have come to own a growing proportion of ordinary shares in industrial and commercial companies. In the present article we examine the implications of this development for two areas of particular concern: corporate control and corporate financing.

Details

Managerial Finance, vol. 11 no. 3/4
Type: Research Article
ISSN: 0307-4358

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