HCBE Faculty Articles

Title

Investment Horizons and Information

Document Type

Article

Date

2016

Publication Title

Journal of Business Finance & Accounting

ISSN or ISBN

1468-5957

Volume

43

Issue

7-8

First Page

1017

Last Page

1056

Description

We examine the relation between institutions' investment horizons on firms' financing and investment decisions. Firms with larger short‐term institutional ownership use less debt financing and invest more in corporate liquidity. In contrast, firms with larger long‐term institutional ownership use more internal funds, less external equity financing, and preserve investments in long‐term assets. These results are primarily driven by the variation in informational preferences of different institutions. We argue that short‐term (long‐term) institutions collect and use value‐neutral (value‐enhancing) information.

DOI

https://doi.org/10.1111/jbfa.12205

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