TY - JOUR
T1 - Institutional investors’ horizon and equity-financed payouts
AU - He, Wen
AU - Mi, Lin
N1 - Funding Information:
We thank three anonymous referees, an associate editor, and Thorsten Beck (the editor) for helpful comments. We acknowledge the financial support from a research grant provided by the Accounting and Finance Association of Australia and New Zealand (AFAANZ).
Funding Information:
We thank three anonymous referees, an associate editor, and Thorsten Beck (the editor) for helpful comments. We acknowledge the financial support from a research grant provided by the Accounting and Finance Association of Australia and New Zealand (AFAANZ).
Publisher Copyright:
© 2021 Elsevier B.V.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2022/1
Y1 - 2022/1
N2 - Farre-Mensa, Michaely and Schmalz (2018) document that many firms issue new equity to finance their payouts to shareholders, despite the substantial cost of equity issuance. We find that equity-financed payouts are related to institutional investors’ horizon. Specifically, firms with a larger ownership by short-horizon institutions are more likely to have equity-financed discretionary payouts, and firms with equity-financed discretionary payouts tend to cut down their investments in the following years. Our results suggest that investor short-termism has significant effects on firms’ payout, financing and investment policies.
AB - Farre-Mensa, Michaely and Schmalz (2018) document that many firms issue new equity to finance their payouts to shareholders, despite the substantial cost of equity issuance. We find that equity-financed payouts are related to institutional investors’ horizon. Specifically, firms with a larger ownership by short-horizon institutions are more likely to have equity-financed discretionary payouts, and firms with equity-financed discretionary payouts tend to cut down their investments in the following years. Our results suggest that investor short-termism has significant effects on firms’ payout, financing and investment policies.
KW - Corporate investments
KW - Financing policy
KW - Institutional investors
KW - Payout policy
KW - Short-termism
UR - https://www.scopus.com/pages/publications/85116918228
U2 - 10.1016/j.jbankfin.2021.106324
DO - 10.1016/j.jbankfin.2021.106324
M3 - Article
AN - SCOPUS:85116918228
SN - 0378-4266
VL - 134
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
M1 - 106324
ER -