Publication Type

Working Paper

Version

submittedVersion

Publication Date

12-2013

Abstract

We propose an Institutional Presence (IP) measure to capture the latent role of non-owner institutional investors who nevertheless may be observing a firm. We employ this measure to examine whether the ‘presence’ of institutional investors reduces information asymmetry in the market. Firms in areas with high institutional presence experience higher liquidity, faster information incorporation, lower costs of equity capital, and less financing frictions relative to firms in low IP areas. The results hold after controlling for firm and geographical characteristics including institutional ownership and urban locality. Our findings indicate that being in the presence of institutional investors brings tangible benefits.

Keywords

institutional investors, non-shareholders, liquidity, cost of capital

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

First Page

1

Last Page

65

Identifier

10.2139/ssrn.2373506

Embargo Period

9-13-2021

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.2139/ssrn.2373506

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