Institutional investor horizons, information environment, and firm financing decisions

Xin Chang, Yangyang Chen*, Kangkang Fu, Endong Yang

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

Abstract

We provide evidence that the investment horizons of institutional shareholders affect firms’ financing decisions. We find that short-term institutional ownership positively affects firms’ likelihood of equity relative to debt issues, the size of equity issues, and the likelihood of long-term relative to short-term debt issues. Firms held more by short-term institutions have lower financial leverage and longer debt maturities. These results suggest that short-horizon institutions, backed by buy-side research, improve the transparency of the information environment, which allows firms to issue more information-sensitive securities. Our findings suggest that institutional investor horizons influence firms’ financing decisions by shaping their information environment.

Original languageEnglish
Article number100397
Number of pages24
JournalJournal of Contemporary Accounting and Economics
DOIs
Publication statusE-pub ahead of print - 25 Dec 2023

Scopus Subject Areas

  • Accounting

User-Defined Keywords

  • Capital structure
  • Debt maturity
  • Information asymmetry
  • Institutional ownership
  • Investor horizons

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