Promoting Longer-Term Investment by Institutional Investors

Croce, Raffaele Della; Stewart, Fiona; Yermo, Juan

doi:10.1787/fmt-2011-5kg55b0z1ktb

Cited by 56 publications

(29 citation statements)

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“…In various experiments, individuals who exhibit strong deviations from an expected utility function and overly discount the future have a clear preference for immediate rewards. Typical effects of short‐termism are performance orientation tilted toward a shorter term (Caldecott & McDaniels, ; Della Croce, Stewart, & Yermo, ; Juravle & Lewis, ). This is in mismatch with the longer‐term investment horizons of asset owners (Eccles & Kastrapeli, ).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Shrinking diversification from a reduced investment universe is also seen as a challenge to efficiently manage portfolios. This are deviations which investors with low conviction about the potential financial implication of certain ESG factors of firms would avoid (Della Croce, Stewart, & Yermo, ; Sikken, ; State Street Global Advisors, ).…”

Section: Literature Reviewmentioning

confidence: 99%

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Why don't we see more action? A metasynthesis of the investor impediments to integrate environmental, social, and governance factors

Friede

2019

Bus Strat Env

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Investors increasingly commit to consider environmental, social, and governance (ESG) factors in their investment decisions. However, the challenges of investors for a holistic integration of ESG factors in their investment decisions are manifold and endanger reaching urgent societal goals. The paper uses metasynthesis to develop a comprehensive understanding of these impediments from a diverse set of papers. Supported by textual analysis, it identifies 161 different topics, which are subsumed within groups and aggregated along a four-pillar framework of market-, firm-, regulatory-, and individual-based impediments. The most prominent impediments are found in the areas of a perceived lack of a business case, the quality of data, the absence of clear standards and definitions, and various behavioral biases.Moreover, a considerable research-practice gap in framing the relevant research questions that contribute to the slow-moving integration process is discovered.Focusing additionally on potential blind spots on the investor and research sides will prove to be important for swifter ESG integration.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Why don't we see more action? A metasynthesis of the investor impediments to integrate environmental, social, and governance factors

Friede

2019

Bus Strat Env

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“…Our intuition is based on a set of studies that suggests that institutional ownership is associated with excess equity return comovement and a destabilization of prices (e.g. Pindyck and Rotemberg 1993;Boyson, Stahel and Stulz 2010;Della Croce et al 2011). In our context, IO may exacerbate tail risk co-movement among banks for the following interrelated reasons: First, institutional investors typically hold larger portfolios of stocks than individuals or insiders.…”

Section: Introductionmentioning

confidence: 99%

Institutional Ownership and the Propagation of Systemic Risk among Banks

et al. 2017

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We investigate whether institutional ownership (IO) plays a role in transmitting systemic risk through banks. We find robust evidence suggesting that IO is positively associated with future systemic risk. We find this relationship is stronger during economic downturns at the economy-wide level, as well as for banks demonstrating greater capital needs. Our results also suggest a trading mechanism through which active, and transient institutions in particular, play a role in propagating systemic risk. We find the relationship exists when there is both overlapping and non-overlapping ownership of banks, and the result is concentrated when there are low monitoring incentives for institutional owners. Furthermore, we find disclosure may play a role in mitigating the transmission of systemic risk by institutional investors. Overall, our results should be of interest to regulators, who have called for institutional investors to play a larger role in bank monitoring, and more broadly to the academic literature that tends to assume the benefits of IO without adequate consideration of the potential costs.

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“…This issue became even more important leading up to and during the recent financial crisis, when institutional investors exerted an allegedly negative impact on the market by pressuring management to increase risk-taking behavior for more short-term profits (e.g., Della Croce et al, 2011;and Erkens et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

“…Institutional investors' stake in the equity market has significantly increased in the last few decades, leading to many studies on the role of institutional investors in corporate governance. This issue became even more important leading up to and during the recent financial crisis, when institutional investors exerted an allegedly negative impact on the market by pressuring management to increase risk-taking behavior for more short-term profits (e.g., Della Croce et al, 2011;and Erkens et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

Institutional Monitoring: Evidence from the F‐Score

Chung¹,

Liu²,

Wang³

et al. 2015

Business Fin & Account

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The extant literature shows that institutional investors engage in corporate governance to enhance a firm's long-term value. Measuring firm performance using the F-Score, we examine the persistent monitoring role of institutional investors and identify the financial aspects of a firm that institutional monitoring improves. We find strong evidence that longterm institutions with large shareholdings consistently improve a firm's F-Score and that such activity occurs primarily through the enhancement of the firm's operating efficiency. Other institutions reduce a firm's F-Score. Moreover, we find evidence that, while monitoring institutions improve a firm's financial health, transient (followed by non-transient) institutions trade on this information.

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Promoting Longer-Term Investment by Institutional Investors

Cited by 56 publications

References 0 publications

Why don't we see more action? A metasynthesis of the investor impediments to integrate environmental, social, and governance factors

Why don't we see more action? A metasynthesis of the investor impediments to integrate environmental, social, and governance factors

Institutional Ownership and the Propagation of Systemic Risk among Banks

Institutional Monitoring: Evidence from the F‐Score

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