Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215451
Authors: 
Cella, Cristina
Year of Publication: 
2019
Series/Report no.: 
Sveriges Riksbank Working Paper Series 373
Abstract: 
Using investors' trading horizons to capture their incentives to collect information and monitor management's decisions, this paper shows that an increase in the ownership stake held by long-term institutional investors is associated with a subsequent decrease in real investment precisely in firms that invest too much. In support of the monitoring hypothesis, we show that results are driven by the purchases of long-term investors, while quasi-indexers and short-term investors have no influence on investment. We address the potential problem of endogeneity using the inclusion of a firm to the S&P 500 Index as an exogenous shock to institutional holdings.
Subjects: 
Institutional ownership
investors' investment horizons
over-investment
under-investment
management monitoring
JEL: 
B2
G31
G32
Document Type: 
Working Paper

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