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Institutional investors’ ownership stability and their investee firms’ equity mispricing

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  • Sakaki, Hamid
  • Jory, Surendranath
  • Jackson, Dave

Abstract

This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm’s market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee (1998, 2001) since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.

Suggested Citation

  • Sakaki, Hamid & Jory, Surendranath & Jackson, Dave, 2021. "Institutional investors’ ownership stability and their investee firms’ equity mispricing," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000693
    DOI: 10.1016/j.najef.2021.101440
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    More about this item

    Keywords

    Institutional investors; Equity mispricing;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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