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This paper presents evidence that higher stock liquidity makes firms increase tone of press releases. I find that firms with higher stock liquidity have higher tone in press releases, relative to the tone of news initiated by media, than firms with lower stock liquidity. This relation is stronger for firms with greater short‐term pressure, that is, with greater transient institutional ownership, greater sensitivity of manager's wealth to stock price, and more analyst coverage. This finding suggests that stock liquidity, by producing short‐term pressure on firms, leads firms to boost press release tone. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of institutional investor horizons on investment efficiency in China. By analysing 26,831 firm‐year observations from Chinese listed companies, we find that long‐term (short‐term) institutional ownership is negatively (positively) associated with the level of inefficient investments. A battery of robustness tests indicates causality. Further analyses reveal that the rise in environmental uncertainty and information asymmetry are transmission channels for increased inefficient investments. Moreover, we find that the single controlling shareholder and state owner can curb the management myopia induced by short‐term institutional investors while they do not impede the monitoring effort of long‐term institutional investors. [ABSTRACT FROM AUTHOR]

By proxying 'awe culture' (i.e., reverence for life and ethical behaviour) with regional induced abortion rates, we examine the impact of awe culture on corporate social responsibility (CSR) in a sample of Chinese firms. We find that firms located in areas with higher induced abortion rates spend less funds on CSR activities and obtain lower CSR scores. The findings remain intact after an array of robustness tests. Further analysis shows that the effect of awe culture on CSR is more pronounced in areas with weaker law enforcement and where the local government emphasises economic growth targets. However, the effect becomes insignificant when firms are well‐represented by top executives with overseas experience, foreign directors, and a high proportion of female board members. The significance of the effect also diminishes for non‐state‐owned firms, and firms with higher institutional ownership and higher cash holdings. Moreover, the lack of awe culture attenuates the positive impact of CSR on firm value. Overall, we document that awe culture, as an informal institution, shapes CSR behaviours. [ABSTRACT FROM AUTHOR]

This paper studies the influence of institutional ownership on the Chinese A‐shares' ESG performance. Findings reveal the positive improvement from institutional investors, and this impact is stronger in firms with better‐expected ESG performance and low initial ESG performance. Besides, heterogeneous institutional investors have different influences, and only a pressure‐resistant institution plays the promotion role. Further studies based on the period following the financial crisis and when emphasising the environmental protection policy reveal that financial motivation and reputation motivation could be the reason for institutional holding. Our findings are robust after using the instrumental variable analysis, controlling for firm fixed effects, and replacing institutional holdings, and could be beneficial for the governance of firms in China. [ABSTRACT FROM AUTHOR]

Employing a large sample of 13,860 firms in 41 economies from 2000 to 2017, we document that the ownership by foreign institutional investors (FIIs) is negatively associated with firms' real earnings management (REM) but unrelated to their accrual earnings management (AEM). We adopt a few identification strategies to tackle the endogeneity issues, including firm‐ and year‐fixed effects regression, two‐stage least squares (2SLS) regression, and difference‐in‐differences (DiD) estimation based on the passage of the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). In addition, we show that the role of FIIs in curbing REM is achieved through the expertise channel and the monitoring channel. These results suggest that when facing disadvantages in curbing AEM, FIIs make the most of their monitoring strengths by curbing firms' REM, where they have both incentives and capabilities to monitor. Overall, this study highlights the important role of FIIs in monitoring opportunistic managerial behaviour. [ABSTRACT FROM AUTHOR]

Identity theory in economics reveals that organisational identification motivates managers to take actions that are strongly aligned with firm interests. Nevertheless, organisational identification may also play a role in personal incentives. Leveraging the availability of CEO organisational identification data from the national internal control survey of listed firms in China, we document a positive impact of CEO organisational identification on corporate innovation. We also find that the positive impact is more pronounced for firms whose CEOs own shares, that are followed by more financial analysts, and that have higher institutional ownership. Additional analyses suggest that the interaction between CEO organisational identification and corporate innovation investment significantly enhances firm value. Overall, our study shows that CEO organisational identification is a non‐trivial driver of firm innovation and growth. [ABSTRACT FROM AUTHOR]

We study the liquidity commonality impact of local and foreign institutional investment in the Australian equity market in the cross‐section and over time. We find that commonality in liquidity is higher for large stocks compared to small stocks in the cross‐section of stocks, and the spread between the two has increased over the past two decades. We show that this divergence can be explained by foreign institutional ownership. This finding suggests that foreign institutional investment contributes to an increase in the exposure of large stocks to unexpected liquidity events in the local market. We find a positive association between foreign institutional ownership and commonality in liquidity across all stocks, particularly in large and mid‐cap stocks. Correlated trading by foreign institutions explains this association. However, local institutional ownership is positively related to the commonality in liquidity for large‐cap stocks only. [ABSTRACT FROM AUTHOR]

This study examines whether and how institutional investors play a corporate governance role in executive pay in China. Based on a sample of Chinese listed firms from 2005 to 2015, we find that higher institutional investor ownership is negatively related to excessive management compensation; this indicates that institutional investors play a governance role in listed firms' decisions on management payment. Institutional investors are more likely to have an influence on executive compensation through their representatives on the corporate board or by conducting site visits, especially when their ownership is high. They will also react, as in the US, by 'voting with their feet'; that is, holding fewer shares than they would otherwise, if firms pay excessive executive compensation, especially when their ownership is low. Cross‐sectional analyses show that the negative impact of institutional ownership on excess management compensation is more evident when firms are not owned by the government, monitored by fewer analysts, and located in regions of China with weak legal investor protection. Our results indicate that institutional investors in China can play an important governance role, especially for firms with characteristics such as location and analyst coverage, for which outside monitoring mechanisms will be in high demand. [ABSTRACT FROM AUTHOR]

This study examines the role played by institutional investors in Australia. With a unique database that provides comprehensive coverage of institutional ownership, this study is the first to examine the overall performance of all institutions in the Australian equity market. Institutional investors do not outperform the market. Examining their trading activities in greater detail, we find that institutional investors do not exploit well‐known stock market anomalies, with the exception of momentum. Institutional investors are also found to sell loser stocks heavily at the end of the financial year, thus contributing to a strong quarter‐end momentum effect. [ABSTRACT FROM AUTHOR]

We examine whether the association between stock liquidity and investment efficiency is more pronounced for firms with more financial constraints and information asymmetry problems. The results show that the effect of higher stock liquidity on lowering under (over)‐investment is more pronounced for firms with more financial constraints and information asymmetry problems as proxied by younger and higher business risk firms, respectively. We also find similar results for firms with lower institutional ownership, more external financing dependence and higher idiosyncratic risks. The findings collectively suggest that the effect of stock liquidity in our setting is more pervasive for firms with more financial constraints and information asymmetry problems. [ABSTRACT FROM AUTHOR]

This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms' investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand‐alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control‐ownership wedge, state‐owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems. [ABSTRACT FROM AUTHOR]

Following CEO turnovers, US firms adjust real business activities to manage earnings downwards (REM bath). This effect is most pronounced in firms with low levels of institutional ownership. REM baths early in CEOs' tenure can be confounded with legitimate adjustments to business activities. However, we show that they are not accompanied by increases in R&D or capital expenses, nor are they explained by restructuring expenses. CEOs with short tenure record more negative REM measures in their first year of tenure, when compared with CEOs with long tenure. [ABSTRACT FROM AUTHOR]

We investigate the demand and supply sides of short‐selling activity in the US from 2003 to 2015. We construct four types of demand‐side variables from fundamentals, and three types of supply‐side variables from institutional ownership (IO) and stock loan data. The supply‐side variables play a more important role in determining short selling than the demand‐side variables. The IO of quasi‐indexer type is the most important supply‐side variable, while the arbitrage and hedging with options market is the most important demand‐side variable. Finally, a portfolio sorting approach confirms the same results. [ABSTRACT FROM AUTHOR]

Financial crises are marked by substantial increases in ambiguity where prices appear to decouple from fundamentals. Consistent with ambiguity‐based asset pricing theories, we find that ambiguity concerns are more severe for firms with higher earnings volatility, causing investors to demand a higher ambiguity premium for such firms. While there is no relation between earnings volatility and stock returns under normal conditions, there is a significant negative relation between crisis‐period stock returns and prior earnings volatility. The effect is stronger in firms with low institutional ownership and low analyst following, consistent with ambiguity concerns being greatest amongst firms with unsophisticated investors. [ABSTRACT FROM AUTHOR]

In this study, we suggest that the level of information opaqueness determines the propensity of publicly listed firms to have debt financing from only a few debt types (i.e., debt specialisation). Using accruals quality as a proxy for information opaqueness, we find that the degree of debt specialisation is lower for firms with high‐quality accruals. This result is consistent with the notion that information collection and monitoring costs are higher for firms that have higher informational opacity, explaining the tendency towards debt specialisation. We further argue that creditors need not monitor borrowers so closely when they are monitored by institutional owners. The empirical findings support this argument and show that firms with more stable institutional ownership are likely to have less specialised debt types. The empirical evidence is also consistent with the expectation that stable institutional ownership is likely to reduce the demand for monitoring over accruals management. Using S&P 500 membership as an exogenous event driving institutional ownership changes, we further document that debt specialisation is decreasing in accruals quality when institutional investors are expected to have an influence. [ABSTRACT FROM AUTHOR]

Cross‐country studies document a negative relation between corporate governance and cash holdings. In contrast, this relation is found to be positive in the United States. In this paper, we examine the case of Japanese firms. Using institutional ownership and cross‐shareholdings as the main governance variables, we show that better governance is associated with higher cash balances as in the United States. The reason is that better‐governed firms make better investment decisions. Their investments are not driven by excess liquidity and result in higher profitability and higher firm valuation. Overall, our findings indicate that management profligacy is a bigger concern to shareholders than management propensity to hoard cash because of risk aversion. [ABSTRACT FROM AUTHOR]

We examine how banks have complied with the Financial Accounting Standards Board's disclosure rules on Level 3 recurring fair value measurements. We document widespread noncompliance with the basic disclosure requirements. We also find that the noncompliant banks are smaller in size and are associated with lower audit quality, lower institutional ownership and less effective internal controls. Our results should be of use to regulators, auditors and audit committees in the United States, Australia and other countries for assessing the likelihood of noncompliance with fair value disclosure rules and improving the quality of fair value disclosures provided to investors. [ABSTRACT FROM AUTHOR]

This article examines the effect of institutional investors' investment horizons on firms' innovation activities. We conjecture that the presence of long‐term institutional investors mitigates managerial myopia, prompting firms to generate greater corporate innovation outputs. Using data on patents and patent citations for US firms, we find that institutions' investment horizons are positively related to the number of patents and patent citations. We also document that long‐term (short‐term) institutional ownership is positively (negatively) related to the innovation outputs. This article makes an additional contribution to the corporate innovation literature by addressing the positive role of long‐term institutional investors. [ABSTRACT FROM AUTHOR]

Using firms from 20 non- US countries, we investigate whether and how ownership structure, analyst following and country-level institutions influence stock price informativeness ( SPI). We find that stock price informativeness decreases with control-ownership wedge (the detachment of voting rights from cash flows rights), and this SPI-reducing effect of the wedge is attenuated for firms with high analyst following and in countries with strong country-level institutions. We also find that stock price informativeness decreases with analyst following, but this SPI-reducing effect of analyst following is attenuated in countries with strong country-level institutions. [ABSTRACT FROM AUTHOR]

Using data from Hong Kong, a market that has family-concentrated ownership structure, we examine the relation between managerial ownership, the board of directors and firm performance. We first conduct analysis on the managerial ownership and firm performance to derive the turning points where either 'convergence of interest' or 'entrenchment' effect of managerial ownership is dominant. Based on these estimated turning points, we find that at low and high level of ownership, effective board mitigates the entrenchment effect associated with managerial ownership; at medium level of ownership, board effectiveness is less demanded. These findings suggest that managerial ownership and board monitoring are substitutes in mitigating the agency problem between managers and shareholders. We also find that effective board curbs the excessive compensation by entrenched managers to themselves at low level of managerial ownership. [ABSTRACT FROM AUTHOR]

We examine what determines executive compensation in privately held firms. Our study is motivated by the fact that most studies in this area rely on data from publicly traded firms. Further, the few studies that are based on data from privately held firms only examine a limited number of determinants of executive compensation. Our findings indicate that the pay-to-performance relation is weak. Board size and ownership concentration are the only corporate governance characteristics that explain variations in executive compensation. Executive characteristics like skills, title and educational attainment all explain variations in executive compensation. Contrary to our expectations, we do not find a stronger pay-to-performance relation in firms with better designed bonus plans. [ABSTRACT FROM AUTHOR]