PlumX Metrics
SSRN
Embed PlumX Metrics

Institutional Investment Horizons and the Cost of Equity Capital

SSRN Electronic Journal
2014
  • 0
    Citations
  • 2,002
    Usage
  • 0
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    2,002
    • Abstract Views
      1,762
    • Downloads
      240
  • Ratings
    • Download Rank
      258,584

Article Description

We examine the influence of institutional investors’ investment horizons on a firm’s cost of equity. We argue that the cost of equity will decrease in the presence of institutional investors with longer-term investment horizons due to improved monitoring and information quality. Our empirical results demonstrate that the cost of equity declines in the presence of institutional investors with long-term investment horizons, all else remaining equal. Our results indicate also that the monitoring role of long-term institutional investors is more pronounced for firms with higher agency problems (poorly governed firms). Overall, our evidence suggests that when considering the influence of institutional investors, it is critical to account for institutional heterogeneity, which gives rise to new directions for future research.

Bibliographic Details

Najah Attig; Sean Cleary; Sadok El Ghoul; Omrane Guedhami

Elsevier BV

Cost of equity; Institutional investment horizons; Corporate governance

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know