Diss. Stockholm : Handelshögsk.

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Thesis (Ph. D.)--University of Texas at Austin, 2001. / Vita. Includes bibliographical references. Available also from UMI/Dissertation Abstracts International.

In this dissertation, I explore the determinants and implications of the preferences of institutional investors. First, I examine whether institutional investors' preference for local investments is related to informational advantage. Analyzing the equity holdings of a large sample of actively managed mutual funds, I find evidence consistent with the mutual fund industry having a perception that local funds have an informational advantage. However, the portfolio of mutual funds' local holdings does not display significant superior performance relative to the portfolio of their distant holdings. Using a parsimonious model, I hypothesize that the profitability of local informational advantage will be low due to the price impact of trading when there is a relatively large population of local agents who trade on similar private information. Consistent with this hypothesis, I find that funds do earn superior returns on local stocks for which local capital is limited and hence the price impact of local trades is likely to be small. Second, I examine the preferences of institutional investors for firm policies and the relationship between these preferences and firm decisions. I find that institutional investors exhibit systematic differences in their preferences for financial and investment policies. Furthermore, these preferences are related to subsequent changes in the financial and investment policies of the firms they invest. In particular, a firm is more likely to decrease (increase) its leverage ratio if its current leverage is higher (lower) than the preferences of its institutional shareholders. A firm is also more likely to increase (decrease) its investment if its current investment ratio is lower (higher) than the preferences of its institutional shareholders. These findings suggest that the preferences of institutional shareholders are important determinants of corporate policies. / text

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Thesis (Ph. D.)--University of Texas at Austin, 2008. / Vita. Includes bibliographical references.

Asymmetric information has crucial implications for various market participants in financial markets, including investors (local and foreign), firms, and governments. The information asymmetry problem is especially severe in emerging markets. My dissertation attempts to address a few information-related questions that interest both academicians and practitioners. The first study adds some new evidence to the on-going debate of whether local or foreign investors are better informed. I offer a new perspective to the issue by examining two market segments within one country but separated by the relevance of local knowledge measured by state ownership. I find that state ownership has a dramatic asymmetric effect on local and foreign institutional investors in China’s stock market. Local (foreign) institutional investors have an informational advantage in state-owned enterprises (SOEs), while foreign institutional investors have an informational advantage in non-state-owned enterprises (non-SOEs). Moreover, the informational advantage of local institutional investors is less evident in SOEs with high board independence and better audit quality. Building on these results, the second study further uses local and foreign institutional ownership as a measure of private information and examines whether firm-specific return volatility proxies for price informativeness. I find firm-specific return volatility is positively related to private information. Therefore the results support the notion that firm-specific return volatility measures the rate of private information impounded into stock prices. My research contributes to the literature in at least four important ways. My findings reconcile the two opposing views on local and foreign investors in the literature and suggest that the informational advantages of local and foreign investors vary with the relevance of local knowledge. Examining only the whole market in past research masks important variation in the relative advantages of local and foreign investors in market segments within a country. My study also suggests that taking into account firm-level characteristics, especially corporate governance measures, can enhance our understanding of the behavior of institutional investors. Additionally I provide some of the first evidence to show that local political institutions can create barriers faced by international investors. Finally, my research confirms the merit of firm-specific return volatility as a measure of price informativeness. Together, these studies provide new insights into research on asymmetric information in emerging markets and have important implications for local and foreign investors, firms, and governments. / Thesis (Ph.D, Management) -- Queen's University, 2011-03-24 19:35:47.788

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This dissertation considers two important issues relevant to the efficiency of institutional investment managers. It examines the trading behaviour of institutional equity funds in relation to investment style drift and dividend payments to assess whether trading is beneficial to investors in these funds. The analysis of investment style is relevant because of the prominence of multiple manager funds in Australia, while institutional investor preferences for dividend income will impact the after-tax return of fund investors. Firstly, monthly equity fund portfolio holdings are used to examine the magnitude of investment style drift. Institutional investor style tilts are consistent with their self-stated investment objective. Decomposing style drift into active and passive components reveals that institutions retain a desired portfolio tilt by actively adjusting their portfolio holdings in response to passive style drift. Furthermore, funds are most responsive to changes in book-to-market and momentum drift, with style drift affecting portfolio turnover. Secondly, the dissertation presents an equilibrium framework of dividend valuation and ex-dividend trading under Australia??s imputation tax system. An examination of returns, volume, and order imbalance in the Australian equity market shows that investors value dividends. The results are consistent with long-term investors accelerating trades to the cum-dividend period and short-term traders targeting fully franked, high yielding dividends with a small bid-ask spread. Franking credits possess a positive value for the majority of the sample while transaction costs impede the efficient adjustment of prices on the ex-dividend day. The results show that a 45-day holding period rule reduces the amount of short-term trading from July 1999. Thirdly, the dissertation places the ex-dividend trading behaviour of institutional equity funds in the context of the findings for the Australian equity market. Institutions accelerate their sales of long-term holdings to the cum-dividend period, and delay purchases until the ex-dividend period to avoid dividends. Institutional trading is consistent with the provision of liquidity to short-term traders that are attempting to capture both dividends and franking credits. The introduction of a long-term capital gains tax discount in 1999 entices institutions to trade in a more tax-efficient manner by selling long-term holdings prior to the ex-dividend day.