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Does institutional investor horizon influence US corporate financing decisions?

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  • Boubaker, Sabri
  • Chourou, Lamia
  • Saadi, Samir
  • Zhong, Ligang

Abstract

This paper examines whether and how institutional investment horizon influences corporate financing decisions. Consistent with our predictions, we find that longer institutional investment horizon is negatively associated with the likelihood that a firm issues equity and debt, and with the amount of security issuance. Our results also indicate that firms with longer investment horizon prefer debt to equity. We also document that debt maturity decreases with the level of ownership by long-term institutional investors. In addition, we show that firms with long-term institutional investors adjust their capital structure at a slower pace.

Suggested Citation

  • Boubaker, Sabri & Chourou, Lamia & Saadi, Samir & Zhong, Ligang, 2019. "Does institutional investor horizon influence US corporate financing decisions?," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 382-394.
    • Handle: RePEc:eee:finana:v:63:y:2019:i:c:p:382-394
    DOI: 10.1016/j.irfa.2017.09.001
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    More about this item

    Keywords

    Institutional investment horizon; Capital structure; Institutional monitoring; Leverage adjustment;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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