The Impact of Institutional Investors, Investment Horizons on ManagementEfficiency and Investment Decisions of the Companies

Document Type : Research Paper

Authors

1 Department of Accounting, Centeral tehran Branch, Islamic Azad University, tehran, Iran

2 Department of Accounting, Central tehran Branch, Tehran, Iran

3 Department of Accounting, Central tehran Branch, Islamic Azad University, Tehran, Iran

4 Department of Accounting, Central tehran Branch, Islamic Azad Univercity,Islamic Azad University,Tehran,Iran

Abstract

Abstract

Institutional investors play a crucial role in monitoring and reducing asymmetric information. Institutional investors reduce asymmetric information by demanding high quality in corporate governance practices and information disclosure that leads to informed decisions on investment choices. In the present study, the impact of institutional investors, investment horizons on management efficiency and investment decisions of the companies is investigated. In thes study, the data of 138 companies listed in tehrak stock Exchange during 2018-2011 were investigated. In order to test the hypothesis, Regression models with panel data method and fixed effects approach areused. The results of the testing of research hypotheses indicated that the short-term investment horizon of institutional investors has a negative and significant impact on management efficiency. also, The research findings indicated that the long–term investment horizon of institutional investors has a negative impact on the investment decisions and expenditures of companies with high operating cash flows, by the method based on Bushee(1998)and these investors(with lng-term investment horizon) reduce theinvestment decisions and expenditures of companies with limited funding. This finding could be due to the fact that the majority of institutional investors withlong–term investment horizon in companies with limited fundinghave absolute control and exacerbate the company's problems in order to extract private benefits.

Keywords


Agudelo, D., Byder, J., Yepes-henao, P., (2018), »Performance and Informed trading, Comparing Foreigners, Institutions and Individuals in an emerging stock market«, Journal of international Money and finance, accepted manuscript, August.
Alvarez, R., Jara, M., Pombo, C., (2018), »Do Institutional Blockholders Influence Corporate Investment? «, Jouranl of Corporate Finance, Elsevier, volume53,September, pp38-64.
Baadawarnahandi, Yunus, and Heshmat, Nisa., (2019), »The effect of corporate governance mechanisms on the relationship between manager, ability and value creation for shareholders«, journal of management accounting, eleventh year, number thirty-eight, Autumn season, pp93-108. (In Persian)
BaniMahd, Bahman, Arabic, Mehdi and Hassanpour, Shiva., (2017), Experimental and methodological Researches in accounting, Tehran, fifth edition. (In persian)
Baghdadi, A., Bhatti, I., Nguyen, L., podolski, E., (2018), »Skill or Effort? Institutional Ownership and Managerial Efficiency«, Jouranl of banking & Finance, volume91, june, pp19-33.
Bazazzadehtorbati, Hamid reza, Malekian, Esfandiar, and Kamyabi, Yahya, (2017), »Market reaction to intangible information: the moderating role of institutional investors«, Financial Accounting quarterly, Eighth year, number thirty-one, autumn season, pp 1-29. (In persian)
Boubaker, S., CHourou, L., Saadi, S., Zhong, L., (2019), » Does Institutional Investor Horizon Influence US coporate Financing Decisions? «, International Review of Financial Analysis,Vol. 63, September, Elsiever, pp. 382-394.
Bushee, B., (1998), » the Influence of institutional investors on myopic R&D Investment Behavior«, the Accounting Review, Vol. 73, No.3, pp. 305-333.
Chung, C., Hur, s., Liu, C., (2018), » Institutional investors and cost stickiness«, The North American journal of Economics and Finance, Vol. 47, December, pp. 336-350.
Dang, T., Moshirian, F., Zhang, B., (2019), » Liquidity Shocks and Institutional Investors«, The North American Journal of Economics and Finance, Vol. 47, December, pp. 184-209.
Erenburg, G., Smith, J., Smith, R., (2016), » Which institutional investors matter for firm survival and performance? «, The North American Journal of Economics and Finance,Elesevier, number 37, 348-373.
Erhemjamts, O., Huang, K., (2019), »Institutional Ownership Horizon, Corporate Social Responsibility and Shareholder Value«, Journal of Business Research 105, Elsevier, PP. 61-79.
Fich, E., Harford, j., Tran, A., (2015), » Motivated monitors: the importance of Institutional Investors Portfolio Weights«, Journal of Financial Economics118, 21-48.
Hutchinson, N., Seamer, M., Chapple, L., (2015), »Institutional Investors, Risk/Performance and Corporate Governance: Practical Lessins from the Global Financial Crisis«, Tht International of Journal Accounting, Volume 50, May, pp.31-52.
Kang, J., Luo, J., Seungna, H., (2018), »Are institutional investors with multiple blockholding effective monitors? «, Jornal of financial Economics, Vol..128, pp.576-602.
Kempf, E., Manconi, A., Spalt, O., (2017), »Distracted shareholders and Corporate actions«, The Review of Financial Studies, volume 30, Elsevier, May, PP. 1660-1695.
Kim, H., Kim, Y., Mantecon, T., Song, K., (2019), »Short-term Institutional Investors and Agency Costs of Debt«, Journal of Business Research 95, Elsevier, PP. 195-210.
Kim, H., Kim, T., Kim, Y., Park, K., (2018), »Do Long-term Institutional Investors Promote Corporate Socail Responsibility Activities? «, Journal of Banking & Finance,Volume101, Elsevier, November, pp.256-269.
Lee, C., Wang, C., Chiu, w., tien, T., (2018), »Managerial ability and corporate investment opportunity«, international review on financial analysis57, Elsevier, pp 65-76.
Moradi, Mehdi., parandeh, Elham and Marandi, Zakia, (2018), »investigating the relationship between institutional investor investment horizon and infomatin content of unexpected share - profits«, journal of financial engineering and securities management, number33, Winter season, pp 207-228. (In Persian)
Nagata, K., Nguyen, P., (2017), »Ownership Structure and Disclosure Quality: Evidence from Management Forecasts Revision in Japan, Journal of Accounting and Public Policy.
Noroozinasr, Hossein, Moradzadehfard, Mehdi, and Shukri, Azam, (2019), »The impact of investment firm ownership on stock Liquidity«, Eleventh year, number forty-two, summer season, pp 23-45. (In persian)
Richardson, S., (2006), »Overinvestment of Free Cash Flow«, Review of Accounting Studies,11, pp. 159-189.
Sanchez, C., Meca, E., Aleman, J., (2018), »Earning informativeness and Institutional Investors on Boards«, Spanish Accounting Review,21, September, pp.73-81.
Sakaki, H., Jory, S., (2019), »Institutional Investors ownership Stability and Firms Innovation«, Journal of Business Research 103, Elsiever, PP.10-22.
Setayesh, Mohammad Hossaein and Ebrahimimeimand, mehdi.,2016, Relationship between type of institutional ownership and the quality of disclosure of companies listed in Tehran stock Exchange«, journal of Experimental Financial accounting studies, number 48, pp53-75. (In persian)
Ward, C., Yin, c., Zeng, Y., (2017), »Motivated Institutional Investors and Firm Investment Efficiency«, Seminar Participants at the ICMA Center, January13.
Ward, C., Yin, c., Zeng, Y., (2017), »Institutional Investor Monotoring Motivation and The Marginal Value of Cash«, Journal of Corporate Finance, volume 48, Elsevier, November, PP. 49-75.
Yan, X., Zhang, Z., (2013), » Institutional Investors and Equity Returns: Are Short- term Institutions Better Informed? «, the Review of Financial Studies, Vol. 22, No. 2, pp.8
Yong, L., Sheng, G., Haiyue., (2015), »An Emprical Study on Institutional Investors, Free Cash Flow and Overinvestment«, Journal of Business and Economics, Academic Star Publishing Company, August, PP.1414-1421.
Yueting, E., Jianling, W., Xuan, W., (2017), »Distracted Instititional Shareholders and Managerial Myopia«, Finance Research Letters 29, Elsevier, PP. 30-40.