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Financial institutions, private acquisition of corporate information, and fund management

Author

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  • J. B. Holland
  • P. Doran

Abstract

The article describes how 27 large UK financial institutions (FIs) sought to acquire an information and influence advantage from the relationships they enjoyed with investee companies in their portfolio. The financial institutions invested much time and effort cultivating these links and contacts. The primary aim of this relationship investment decision was to produce added value in stock selection and asset allocation decisions. The resulting fund performance was the means for inancial institutions to satisfy a fiduciary duty to supply their clients with their preferred mix of return, diversification and liquidity. This problem area is investigated by using financial institutional case data to describe FI behaviour when interacting with their relationship investee companies. The article ends by analysing the case data and case structures through the perspective of inance theory.

Suggested Citation

  • J. B. Holland & P. Doran, 1998. "Financial institutions, private acquisition of corporate information, and fund management," The European Journal of Finance, Taylor & Francis Journals, vol. 4(2), pages 129-155.
    • Handle: RePEc:taf:eurjfi:v:4:y:1998:i:2:p:129-155
    DOI: 10.1080/135184798337353
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    References listed on IDEAS

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    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Smith, Michael P, 1996. "Shareholder Activism by Institutional Investors: Evidence for CalPERS," Journal of Finance, American Finance Association, vol. 51(1), pages 227-252, March.
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    Cited by:

    1. Brooks, Chris & Fenton, Evelyn & Schopohl, Lisa & Walker, James, 2019. "Why does research in finance have so little impact?," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 58(C), pages 24-52.
    2. Maroun, Warren & van Zijl, Wayne, 2016. "Isomorphism and resistance in implementing IFRS 10 and IFRS 12," The British Accounting Review, Elsevier, vol. 48(2), pages 220-239.
    3. Graaf, Johan & Johed, Gustav, 2020. "“Reverse brokering” and the consumption of accounting: A broker desk ethnography of an investment case," Accounting, Organizations and Society, Elsevier, vol. 85(C).
    4. Yanan Li & Wenjun Wang, 2022. "Company visits and mutual fund performance: new evidence on managerial skills," Journal of Asset Management, Palgrave Macmillan, vol. 23(6), pages 504-521, October.
    5. Han, Jinhui & Li, Xiaolong & Ma, Guiyuan & Kennedy, Adrian Patrick, 2023. "Strategic trading with information acquisition and long-memory stochastic liquidity," European Journal of Operational Research, Elsevier, vol. 308(1), pages 480-495.
    6. Solomon, Jill F. & Solomon, Aris & Joseph, Nathan L. & Norton, Simon D., 2013. "Impression management, myth creation and fabrication in private social and environmental reporting: Insights from Erving Goffman," Accounting, Organizations and Society, Elsevier, vol. 38(3), pages 195-213.
    7. Hellman, Niclas, 2002. "Information use in institutional investor organizations," SSE/EFI Working Paper Series in Business Administration 2002:19, Stockholm School of Economics.
    8. Maroun, Warren, 2017. "Assuring the integrated report: Insights and recommendations from auditors and preparers," The British Accounting Review, Elsevier, vol. 49(3), pages 329-346.
    9. John Holland, 2005. "A grounded theory of corporate disclosure," Accounting and Business Research, Taylor & Francis Journals, vol. 35(3), pages 249-267.
    10. van Zijl, Wayne & Maroun, Warren, 2017. "Discipline and punish: Exploring the application of IFRS 10 and IFRS 12," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 44(C), pages 42-58.
    11. Roberts, John & Sanderson, Paul & Barker, Richard & Hendry, John, 2006. "In the mirror of the market: The disciplinary effects of company/fund manager meetings," Accounting, Organizations and Society, Elsevier, vol. 31(3), pages 277-294, April.
    12. Barker, Richard & Hendry, John & Roberts, John & Sanderson, Paul, 2012. "Can company-fund manager meetings convey informational benefits? Exploring the rationalisation of equity investment decision making by UK fund managers," Accounting, Organizations and Society, Elsevier, vol. 37(4), pages 207-222.
    13. Johan Henningsson, 2008. "Does SEE information make a difference to fund managers?," Sustainable Development, John Wiley & Sons, Ltd., vol. 16(3), pages 169-179.
    14. Paul Cox & Diandra Soobiah, 2018. "Evidence on post-financial crisis corporate culture in UK listed banks," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(2), pages 149-159, April.
    15. Ping Wei & Xiaodan Mao & Xiaohong Chen, 2020. "Institutional investors' attention to environmental information, trading strategies, and market impacts: Evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 566-591, February.
    16. Rolf Brühl & Nils Horch & Mathias Orth, 2008. "Grounded Theory und ihre bisherige Anwendung in der empirischen Controlling- und Rechnungswesenforschung," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 19(3), pages 299-323, December.
    17. John Holland, 2011. "Behaviour and Investment Actions within Fund Managers and their Markets - Developing and analysing a grounded theory of fund management," Working Papers CEB 11-057, ULB -- Universite Libre de Bruxelles.
    18. Junyong He & Helen Hui Huang & Shunming Zhang, 2020. "Ambiguity Aversion, Information Acquisition, and Market Opacity," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 263-329, November.
    19. Genevé Richard & Elza Odendaal, 2020. "Integrated reporting assurance practices—a study of South African firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 245-266, December.
    20. John Richard Edwards & Trevor Boyns, 2022. "Published Accounts, Stewardship, and Decision Making: A Case Study 1863–1940," Abacus, Accounting Foundation, University of Sydney, vol. 58(2), pages 300-333, June.
    21. Genevé Richard & Elza Odendaal, 2021. "Credibility-enhancing mechanisms, other than external assurance, in integrated reporting," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(1), pages 61-93, March.

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