Institutional investor horizons, ownership structure and investment efficiency in China

This paper investigates the effects of institutional investor horizons on investment efficiency in China. By analysing 26,831 firm‐year observations from Chinese listed companies, we find that long‐term (short‐term) institutional ownership is negatively (positively) associated with the level of inef...

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Bibliographic Details
Published inAccounting and finance (Parkville) Vol. 64; no. 1; pp. 739 - 782
Main Authors Wang, Zhihao, Liao, Kezhi, Wang, Sisi
Format Journal Article
LanguageEnglish
Published Clayton Blackwell Publishing Ltd 01.03.2024
Subjects
agency theory
China
institutional investor horizons
investment efficiency
ownership structure
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Summary:This paper investigates the effects of institutional investor horizons on investment efficiency in China. By analysing 26,831 firm‐year observations from Chinese listed companies, we find that long‐term (short‐term) institutional ownership is negatively (positively) associated with the level of inefficient investments. A battery of robustness tests indicates causality. Further analyses reveal that the rise in environmental uncertainty and information asymmetry are transmission channels for increased inefficient investments. Moreover, we find that the single controlling shareholder and state owner can curb the management myopia induced by short‐term institutional investors while they do not impede the monitoring effort of long‐term institutional investors.
ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.13164