scholarly journals Standing on the Shoulders of Giants: The Effect of Passive Investors on Activism

2018 ◽  
Vol 32 (7) ◽  
pp. 2720-2774 ◽  
Author(s):  
Ian R Appel ◽  
Todd A Gormley ◽  
Donald B Keim
Keyword(s):  
Mutual Funds ◽  
Institutional Investors ◽  
Free Rider ◽  
Recent Growth ◽  
Editorial Decision ◽  
Proxy Fights ◽  
Board Representation ◽  
Passive Investors

Abstract We analyze whether the growing importance of passive investors has influenced the campaigns, tactics, and successes of activists. We find activists are more likely to seek board representation when a larger share of the target company’s stock is held by passively managed mutual funds. Furthermore, higher passive ownership is associated with increased use of proxy fights, settlements, and a higher likelihood the activist achieves board representation or the sale of the targeted company. Our findings suggest that the recent growth of passive institutional investors mitigates free-rider problems and facilitates activists’ ability to engage in costly, value-enhancing forms of monitoring. Received September 28, 2016; editorial decision August 18, 2018 by Editor Andrew Karolyi.

scholarly journals Review of Mutual Funds Investment in India

2021 ◽  
Vol 12 (2) ◽  
pp. 1326-1330
Author(s):  
Govindappa Mani, Et. al.
Keyword(s):  
Mutual Funds ◽  
Institutional Investors ◽  
Unit Trust

The Indian mutual fund's industry, which started its excursion with the foundation of the Unit Trust of India in 1964, has seen unobtrusive development lately. There has been developing both regarding AUM just as the assortment of items advertised. As on December 2015, the investors in India have a choice to look over in excess of 1,000 of mutual funds plans spread across 44 fund houses with a complete AUM estimation of '13.46 lakh crores. The passage of unfamiliar players has prompted the presentation of an assortment of inventive items to suit the developing necessities of Indian investors. The Indian mutual fund's industry was discovered to be overwhelmed by institutional investors.

scholarly journals The Rise of Institutional Investors

2019 ◽  
Author(s):  
Jan Fichtner
Keyword(s):  
Mutual Funds ◽  
Hedge Funds ◽  
Institutional Investors ◽  
Private Equity ◽  
Short Term ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Important Position ◽  
State Street ◽  
Asset Managers

During the last decades, institutional investors gained an ever more important position as managers of assets and owners of corporations. By demanding (short-term) shareholder value, some of them have driven the financialization of corporations and of the financial sector itself. This chapter first characterizes the specific roles that private equity funds, hedge funds, and mutual funds have played in this development. It then moves on to focus on one group of institutional investors that is rapidly becoming a pivotal factor for corporate control in many countries – the “Big Three” large passive asset managers BlackRock, Vanguard and State Street.

Institutional Herding: Causality and Persistence

2021 ◽  
pp. 227797522110402
Author(s):  
S S S Kumar
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Mutual Funds ◽  
Institutional Investors ◽  
International Markets ◽  
Jel Classification ◽  
Trading Strategies ◽  
Trading Activity ◽  
Indian Stock Market ◽  
Institutional Herding

We investigate the causality in herding between foreign portfolio investors (FPIs) and domestic mutual funds (MFs) in the Indian stock market. The estimated herding levels are considerably higher than those observed in other international markets, and herding is prevalent in small stocks. We find that institutional investors follow contrarian-trading strategies, unlike what was documented in most other markets. Analysis of the aggregate herding measure shows a bi-directional causality between FPIs and MFs. Further analysis using directional herding measures indicate no evidence of causality between institutional herds on the sell-side. But we find causality on the buy-side and it is running in both directions between FPIs and MFs, implying a feedback of information. Given the tendency of institutions for herding in small stocks, adopting contrarian-trading strategies, the observed sell-side causality is perhaps having a salubrious effect. As institutional investors are contrarians, their trading activity will lead to price corrections in small stocks aligning with the fundamentals, thereby contributing to market efficiency. JEL Classification: C23, C58, G23, G15, G40

A study of prominence for disposition effect: a systematic review

2019 ◽  
Vol 11 (1) ◽  
pp. 2-21 ◽  
Author(s):  
Syed Aliya Zahera ◽  
Rohit Bansal
Keyword(s):  
Mutual Funds ◽  
Behavioral Finance ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Disposition Effect ◽  
Individual Investors ◽  
Content Type ◽  
Experimental Market ◽  
The Individual ◽  
The Impact

Purpose The purpose of this paper is to study the disposition effect that is exhibited by the investors through the review of research articles in the area of behavioral finance. When the investors are hesitant to realize the losses and quick to realize the gains, this phenomenon is known as the disposition effect. This paper explains various theories, which have been evolved over the years that has explained the phenomenon of disposition effect. It includes the behavior of individual investors, institutional investors and mutual fund managers. Design/methodology/approach The authors have used the existing literatures from the various authors, who have studied the disposition effect in either real market or the experimental market. This paper includes literature over a period of 40 years, that is, Dyl, 1977, in the form of tax loss selling, to the most recent paper, Surya et al. (2017). Some authors have used the PGR-PLR ratio for calculating the disposition effect in their study. However, some authors have used t-test, ANNOVA, Correlation coefficient, Standard deviation, Regression, etc., as a tool to find the presence of disposition effect. Findings The effect of disposition can be changed for different types of individual investors, institutional investors and mutual funds. The individual investors are largely prone to the disposition effect and the demographic variables like age, gender, experience, investor sophistication also impact the occurrence of the disposition effect. On the other side, the institutional investors and mutual funds managers may or may not be affected by the disposition effect. Practical implications The skilled understanding of the disposition effect will help the investors, financial institutions and policy-makers to reduce the adverse effect of this bias in the stock market. This paper contributes a detailed explanation of disposition effect and its impacts on the investors. The study of disposition effect has been found to be insufficient in the context of Indian capital market. Social implications The investors and society at large can gains insights about causes and influences of disposition effect which will be helpful to create sound investment decisions. Originality/value This paper has complied the 11 causes for the occurrence of disposition effect that are found by the different authors. The paper also highlights the impact of the disposition effect in the decision-making of various investors.

Does institutional ownership affect firms' international investments? empirical evidence from India

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manogna R L ◽  
Aswini Kumar Mishra ◽  
Abhishek Kumar Sinha
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Risk Perceptions ◽  
Emerging Economy ◽  
Strategic Decision ◽  
Foreign Investments ◽  
International Investments ◽  
Content Type ◽  
Lending Institutions

PurposeThe preference of firm internationalization is shaped by different groups of owners and the institutional environment in which the firm operates. Past studies have largely ignored the heterogeneity among the controlling groups in influencing the internationalization decision in emerging economy firms.Design/methodology/approachIn this study, the authors draw understanding from behavioral risk perspective and institutional theory to inspect the risk perceptions and propensities of various ownership groups such as lending institutions, domestic mutual funds and foreign institutional investors (FIIs). Empirical analysis was conducted from a sample of 2695 unique BSE-listed nonfinancial Indian firms during 2005−2019 period using Tobit panel regression analysis.FindingsThe findings reveal that firms' international investments are impacted differently by ownership share of different types of institutional investors after controlling for firm-level resources and capabilities. While lending institutions and FIIs are supportive of foreign investments by firms, domestic mutual funds are not supportive of this strategic decision on foreign investment.Research limitations/implicationsFurther, our results show that family ownership, measured in terms of family shareholding, negatively moderates the lending institutions toward internationalization and does not impact the FIIs and mutual fund investor's decision regarding the foreign investments.Originality/valueTo the best of the author's knowledge, the current paper is the first to address the risk perceptions of various ownership groups on firm's international outlook in an emerging economy context with the latest data. This practical perspective helps the organizations in managing the ownership holdings.

scholarly journals Co-operative Values, Institutions and Free Riding in Australia

2006 ◽  
Vol 60 (4) ◽  
pp. 709-736 ◽  
Author(s):  
David Peetz
Keyword(s):  
Free Riding ◽  
Free Rider ◽  
The State ◽  
Central Problem ◽  
Institutional Changes ◽  
Voluntary Organization ◽  
Alternative Models ◽  
Collective Agreements ◽  
Recent Growth ◽  
Social Obligation

While there is a strong logic favouring co-operation, it faces a central problem: the “free rider” or “cheat.” Collectives find ways of promoting norms of solidarity and seek regulation to prevent free riding. Around two-fifths of Australian employees covered by collective agreements are free-riding non-members. Evidence suggests that the recent growth of free riding reflects institutional changes and not the decline of co-operative values and the ascendancy of individualism. The Canadian solution to the cheating problem, which is the Rand formula, inspired Australian unions to introduce (excessive) “agency fees” into collective agreements. These were eventually stopped by the state. Alternative models include “social obligation fees”—provisions for employees covered by the agreement to make a contribution to a voluntary organization of their choice.

scholarly journals Timing Trades And Mutual Fund Investors

2011 ◽  
Vol 2 (5) ◽  
Author(s):  
Richard H. Fosberg
Keyword(s):  
Mutual Funds ◽  
News Media ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Cash Holdings ◽  
Shareholder Wealth ◽  
Empirical Question ◽  
Specific Timing

Recently, a number of well known mutual funds advisors, including Strong, Putnam, and Bank of America, have been accused of or admitted to allowing selected institutional investors to engage in timing trades with the shares of some of the mutual funds they manage.  The news media has generally taken the position that timing trades reduce the wealth of other fund investors.  In this study, I show that timing trades can either increase, decrease, or leave unchanged fund shareholder wealth.  Which outcome results will depend on specific timing trader and fund characteristics such as the frequency and accuracy of timing trader speculation, the trading of other fund shareholders, the return on the fund's security portfolio, and how much a mutual fund must increase its cash holdings to cover the transactions of timing traders.  Consequently, whether timing traders harm other fund shareholders is an empirical question.

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