We re-examine the determinants of institutional ownership (IO) from a segmentation perspective -- i.e. accounting for a hypothesized systematic exclusion of stocks that cause high implementation or agency costs. Incorporating segmentation effects substantially improves both explained variance in IO and model parsimony (essentially requiring just one input: market capitalization). Our evidence clearly establishes a role for both implementation costs and agency considerations in explaining segmentation effects. Implementation costs bind for larger, less diversified, and higher turnover institutions. Agency costs bind for smaller institutions and clienteles sensitive to fiduciary diligence. Agency concerns dominate; characteristics relating to the agency hypothesis have far more explanatory power in identifying the cross-section of segmentation effects than characteristics relating to the implementation hypothesis. Importantly, our study finds evidence for interior optimum with respect to the institution's scale, due to the counteracting effect between implementation and agency frictions. We then explore three implications of segmentation for the equity market. First, a mass exodus of publicly listed stocks predicted to fall outside institutions' investable universe helps explain the listing puzzle. There has been no comparable exit by institutionally investable stocks. Second, institutional segmentation can lead to narrow investment opportunity sets, which limit money managers' ability to take advantage of profitable opportunities outside their investment segment. In this respect, we construct pricing factors that are feasible (ex-ante) for institutions and benchmark their performance. We find evidence consistent with the demand-based asset pricing view. Specifically, IO return factors yield higher return premia and worsened institutional performance relative to standard benchmarks in an expanding institutional setting (pre-millennium). Third, we use our logistic model and examine the effect of aggregated segmentation on the institutions' portfolio returns. Our findings suggest that investment constraints cut profitable opportunities and restrict institutions from generating alpha. In addition, we find that stocks with abnormal institutional ownership generate significant positive returns, suggesting institution actions are informed. / Doctor of Philosophy / We demonstrate that implementation and agency frictions restrict professional money managers from ownership of particular stocks. We characterize this systematic exclusion of stocks as segmentation and show that a specification that accommodates the segmentation effect substantially improves the empirical fit of institutional demand. The adjusted R-squared increases substantially; the residuals are better behaved, and the dimensionality of institutions' demands for stock characteristics reduces from a list of 8-10 standard characteristics (e.g., market cap, liquidity, index membership, volatility, beta) to just one: a stock's market capitalization. Our evidence identifies a prominent role for both implementation costs and agency costs as determinants of institutional segmentation. Implementation costs bind for larger, less diversified, and higher turnover institutions. Agency costs bind for smaller institutions and clienteles sensitive to fiduciary diligence. In fact, we find that segmentation arises from a trade-off between implementation costs (which bind for larger institutions) and agency considerations (which bind for smaller institutions). Agency concerns dominate; characteristics relating to the agency hypothesis have far more explanatory power in identifying the cross-section of segmentation effects than characteristics relating to the implementation hypothesis. More importantly, we find evidence for interior optimum with respect to the institution's scale, due to the counteracting effect between implementation and agency frictions. This conclusion is important to considerations of scale economies/diseconomies in investment management. The agency story goes in the opposite direction to the conventional wisdom underlying scale arguments. We then explore three implications of segmentation for the equity market. First, our evidence suggests that institutional segmentation coupled with growing institutional dominance in public equity markets may have had a truncating effect on the universe of listed stocks. Stocks predicted to fall outside of institutions' investable universe were common prior to the 1990s, but are now almost nonexistent. By contrast, stocks predicted to fall within institutions' investable universe have not declined over time. Second, institutional segmentation can lead to narrow investment opportunity sets, which limit money managers' ability to take advantage of profitable opportunities outside their investment segment. In this respect, we construct pricing factors that are feasible (ex-ante) for institutions and benchmark their performance. We find evidence consistent with the demand-based asset pricing view. Specifically, feasible return factors yield higher return premia and worsened institutional performance relative to standard benchmarks in an expanding institutional setting (pre-millennium). Third, we use logistic specification and examine the effect of aggregated segmentation on the institutions' portfolio returns. Our findings suggest that investment constraints cut profitable opportunities and restrict institutions from generating alpha. In addition, we find that stocks with high (low) abnormal institutional ownership generate significant positive (negative) returns, suggesting institution actions are informed.

Det finns ett flertal tidigare studier som undersöker listbyten och dess effekt på ett bolags aktieavkastning. Merparten av dessa studier är dock baserade på den amerikanska aktiemarknaden. De svenska studierna som har genomförts undersöker effekten av listbyte från alternativa marknadsplatser (MTF) till huvudmarknaden (reglerad marknad). Det har framkommit att det finns ett kunskapsgap vad gäller hur aktieavkastning reagerar på marknadsplatsbyten på Sveriges MTF-er. Genom att endast fokusera på MTFmarknadsplatserna,AktieTorget, First North och Nordic MTF i Sverige och effekten av bytenmellan dessa marknadsplatser blir denna studie ett komplement till den tidigare forskningen inom området. I studien undersöks 39 svenska bolag som mellan åren 2007-2016 valt att byta marknadsplats. OMXPI är det jämförelseindex som använts för att jämföra bolagens avkastning med marknaden. Syftet med denna studie är att undersöka om det finns ett värdeför såväl bolagen som dess aktieägare att byta marknadsplats mellan AktieTorget, Nordic MTF och First North, istället för att stanna kvar på den ursprungliga listan. Detta syfte uppnås genom att studien undersöker bolagens aktieavkastning i samband med flytt till likvärdig, alternativ, marknadsplats för att ta reda på om bytet av marknadsplats skapar en negativ avkastning hos bolagen. Denna studie utförs i form av en kvantitativ eventstudie där marknadsplatsbytet utgör eventet. Studiens avsikt är inte att analysera de enskilda bolagen utan att istället ge en samlad bild av effekten på den aktiekursutveckling listbytet medför. Resultatet av studien visar att en negativ ackumulerad onormal avkastning (CAR) förekommer efter att marknadsplatsbytet genomförts. Vid beräkning av parametrarna imarknadsmodellen finner studien att den genomsnittliga ackumulerade onormala avkastningen (CAAR) för samtliga bolag är hela -47,88 %, 12 månader efter att marknadsplatsbytet genomförts. / There are several previous studies that examine switches between marketplaces and how these changes impact companies share performance. The most foregoing research made on the subject share performance is based on the US stock market. Swedish studies made to the subject examine the share performance when companies move from one of the SwedishMultilateral Trading Facilities (MTF) to main market. The authors of this paper have noted that there is a gap of knowledge regarding share performance when companies move between the Multilateral Trading Facilities. By only examining the Swedish Multilateral Trading Facilities, AktieTorget, First North and Nordic MTF, and how moving between the lists affects the share performance, this study is an addition to the previous research in the field.This study examines 39 Swedish companies, which have changed list between 2007-2016. OMXSPI is the benchmark used in this study to compare the companies return with the market return. The purpose of this study is to examine if there is a value for both the companies and its shareholders to exchange marketplaces between the Swedish Multilateral Trading Facilities, AktieTorget, First North and Nordic MTF. This purpose is achieved byexamine the company’s stock price development before and after the change of market place and identify if the change creates a negative share performance. This study is conducted in the form of a quantitative event study where the marketplace change represents the event. The purpose is not to analyze the individual companies but to provide a comprehensive picture ofthe effect the marketplace changes have on the stock price development. The result of the study indicates that a negative accumulated abnormal return (CAR) occurs after the marketplace change. When calculating the parameters in the market model the study finds that the average accumulated abnormal return (CAAR) for all companies is a total of -47,88 % twelve months after the marketplace change.