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The Valuation Effects of Equity Issues and the Level of Institutional Ownership: Evidence from Analysts' Earnings Forecasts


  • Peter A. Brous
  • Omesh Kini


This paper investigates whether the level of institutional ownership has any effect on the market reaction to announcements of a firm-level "event", namely the issuance of equity. Previous studies that have examined the association between some proxy for firm value (either Tobin's q or a measure of accounting profitability) and ownership structure have a problem with the direction of causality. For instance, a positive association between firm value and institutional ownership can either be interpreted as evidence of monitoring by institutions or that institutions tend to invest systematically in high-value firms. If we find any relation between the announcement effects of equity issues, and therefore firm value, and institutional ownership, the direction of causality has to run from institutional ownership to firm values not the other way around.

Suggested Citation

  • Peter A. Brous & Omesh Kini, 1994. "The Valuation Effects of Equity Issues and the Level of Institutional Ownership: Evidence from Analysts' Earnings Forecasts," Financial Management, Financial Management Association, vol. 23(1), Spring.
  • Handle: RePEc:fma:fmanag:brous94

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    Cited by:

    1. Suchard, Jo-Ann, 2005. "The use of stand alone warrants as unique capital raising instruments," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1095-1112, May.
    2. Bricker, Robert & Chandar, Nandini, 2000. "Where Berle and Means went wrong: a reassessment of capital market agency and financial reporting," Accounting, Organizations and Society, Elsevier, vol. 25(6), pages 529-554, August.
    3. Ting Luo & Zhiguo Xiao, 2015. "Selective Disclosure Associated with Institutional Investors: Evidence Based on Chinese Stock Market," Annals of Economics and Finance, Society for AEF, vol. 16(2), pages 515-542, November.
    4. Sanjiv Sabherwal & Stephen D. Smith, 1999. "Concentrated shareholdings and the number of outside analysts," FRB Atlanta Working Paper 99-7, Federal Reserve Bank of Atlanta.
    5. repec:wsi:rpbfmp:v:21:y:2018:i:03:n:s0219091518500194 is not listed on IDEAS
    6. repec:mes:emfitr:v:53:y:2017:i:4:p:764-775 is not listed on IDEAS
    7. Iatridis, George, 2010. "International Financial Reporting Standards and the quality of financial statement information," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 193-204, June.
    8. Velury, Uma & Jenkins, David S., 2006. "Institutional ownership and the quality of earnings," Journal of Business Research, Elsevier, vol. 59(9), pages 1043-1051, September.

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