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Article: Corporate financing of investment opportunities in a world of institutional cross-ownership

TitleCorporate financing of investment opportunities in a world of institutional cross-ownership
Authors
KeywordsAdverse selection
Corporate financing
Information advantage
Institutional cross-ownership
Investment opportunities
Issue Date2021
Citation
Journal of Corporate Finance, 2021, v. 69, article no. 102041 How to Cite?
AbstractInstitutional cross-owners, specifically institutional investors with significant stakes in multiple firms in the same industry, are becoming increasingly common in the United States. In this paper, we investigate and find that the presence of institutional cross-owners facilitates a firm's financing of its investment opportunities, consistent with institutional cross-owners reducing the adverse selection concerns of those who provide capital for the investment opportunities. We then examine the conditions under which the presence of institutional cross-owners is likely to more significantly reduce adverse selection and thereby have even more of a positive effect on the financing of investment opportunities. We document that relative to transient institutional cross-owners, dedicated institutional cross-owners facilitate more financing of investment opportunities. We also find that institutional cross-owners facilitate the financing of investment opportunities even more for firms with greater dependence on external financing, those with an opaque financial reporting environment, and those with more product market competition. Our paper offers novel insight into how a firm can benefit from the presence of institutional cross-owners.
Persistent Identifierhttp://hdl.handle.net/10722/315196
ISSN
2023 Impact Factor: 7.2
2023 SCImago Journal Rankings: 3.182
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorChen, Yangyang-
dc.contributor.authorLi, Qingyuan-
dc.contributor.authorNg, Jeffrey-
dc.contributor.authorWang, Chong-
dc.date.accessioned2022-08-05T10:18:00Z-
dc.date.available2022-08-05T10:18:00Z-
dc.date.issued2021-
dc.identifier.citationJournal of Corporate Finance, 2021, v. 69, article no. 102041-
dc.identifier.issn0929-1199-
dc.identifier.urihttp://hdl.handle.net/10722/315196-
dc.description.abstractInstitutional cross-owners, specifically institutional investors with significant stakes in multiple firms in the same industry, are becoming increasingly common in the United States. In this paper, we investigate and find that the presence of institutional cross-owners facilitates a firm's financing of its investment opportunities, consistent with institutional cross-owners reducing the adverse selection concerns of those who provide capital for the investment opportunities. We then examine the conditions under which the presence of institutional cross-owners is likely to more significantly reduce adverse selection and thereby have even more of a positive effect on the financing of investment opportunities. We document that relative to transient institutional cross-owners, dedicated institutional cross-owners facilitate more financing of investment opportunities. We also find that institutional cross-owners facilitate the financing of investment opportunities even more for firms with greater dependence on external financing, those with an opaque financial reporting environment, and those with more product market competition. Our paper offers novel insight into how a firm can benefit from the presence of institutional cross-owners.-
dc.languageeng-
dc.relation.ispartofJournal of Corporate Finance-
dc.subjectAdverse selection-
dc.subjectCorporate financing-
dc.subjectInformation advantage-
dc.subjectInstitutional cross-ownership-
dc.subjectInvestment opportunities-
dc.titleCorporate financing of investment opportunities in a world of institutional cross-ownership-
dc.typeArticle-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jcorpfin.2021.102041-
dc.identifier.scopuseid_2-s2.0-85109881513-
dc.identifier.volume69-
dc.identifier.spagearticle no. 102041-
dc.identifier.epagearticle no. 102041-
dc.identifier.isiWOS:000694715200011-

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