رنگ پول سرمایه گذاران: نقش موسسات سرمایه گذاری در سراسر جهان

We study the role of institutional investors around the world using a comprehensive data set of equity holdings from 27 countries. We find that all institutional investors have a strong preference for the stock of large firms and firms with good governance, while foreign institutions tend to overweight firms that are cross-listed in the U.S. and members of the Morgan Stanley Capital International World Index. Firms with higher ownership by foreign and independent institutions have higher firm valuations, better operating performance, and lower capital expenditures. Our results indicate that foreign and independent institutions, with potentially fewer business ties to firms, are involved in monitoring corporations worldwide.

A key factor in global capital markets is the fast growing importance of institutional investors. According to the International Monetary Fund (2005) (IMF), these professional investors manage financial assets exceeding US$45 trillion (including over US$20 trillion in equities). Assets under management of institutions have tripled since the early 1990s. Further, institutional investors are major players not just in developed markets; their role is rapidly growing in emerging market countries (see Khorana, Servaes, and Tufano, 2005). In this paper we examine what drives institutional investors to firms and what role these investors play. Gillan and Starks (2003) posit that the rise of professional money managers as a large shareholder group in corporations worldwide offers the potential for increased monitoring of firm management. Institutions’ involvement can range from threatening the sale of shares to the active use of corporate voting rights or meetings with management.1 We are interested in whether these large investors are effective in influencing corporate management and boards towards creating shareholder value. But there are reasons to expect that not all money managers are equally equipped or motivated to be active monitors. Foreign and more independent institutions are many times credited with taking a more active stance, while other institutions that have business relations with local corporations may feel compelled to be loyal to management. For example, Fidelity is reported to be more aggressive on governance issues in Europe, but it is relatively acquiescent in the U.S. where it manages several corporate pension accounts (Business Week, 2006 and Davis and Kim, 2006). Further, several empirical studies suggest that independent investment advisers and mutual funds are active monitors (Brickley, Lease, and Smith, 1988; Almazan, Hartzell, and Starks, 2005; Chen, Harford, and Li, 2007). There is little evidence on the monitoring role of institutional investors outside the U.S., so we offer a first exploration of this issue. Toward this end, we use a new comprehensive database of institutional stock holdings worldwide. The data set contains holdings at the stock-investor level of over 5,300 institutions in 27 countries, with positions totaling US$ 18 trillion as of December 2005. Thus, the institutional ownership data used in this paper represent nearly 40% of the world stock market capitalization. For a better understanding of the role of institutional investors worldwide, we focus on non-U.S. firms in which institutions hold US$ 5.2 trillion.2 These institutional investors, depending on their geographic origin, could be a U.S.-based mutual fund manager (like Fidelity), a non-U.S.-based pension or endowment fund (like Norway's State Petroleum Fund), or a domestic bank trust or insurance company (like BNP Paribas and AXA in France). Overall, U.S.-based institutions hold more than US$ 2 trillion overseas in non-U.S. stocks. This is matched by US$ 1.7 trillion held by non-U.S. foreign institutions and US$ 1.5 trillion by domestic institutions. Thus, while most research to date looks at U.S. institutions as the primary source of capital, we find that the three groups of professional investors worldwide have similar pools of capital. We start by exploring the revealed stock preferences of these three different institutional investor clienteles (U.S., non-U.S. foreign, and domestic money managers), and investigating which firm- and country-level characteristics attract a particular group. Our results reveal preferences when investing at home, much like those that U.S. institutions exhibit in U.S. markets (Gompers and Metrick, 2001), but money managers exhibit specific preferences when investing abroad. First, we find that all institutional investors, whatever their geographic origin, share a preference for the stock of large and widely held firms (i.e., companies without large controlling blockholders), of firms in countries with strong disclosure standards, and of firms located physically near their home market. Second, foreign and domestic institutional investors diverge in some stock preferences. Foreign institutional investors have a strong bias for firms in the Morgan Stanley Capital International (MSCI) World Index, firms that are cross-listed on a U.S. exchange, and firms that have external visibility through high foreign sales and analyst coverage. Domestic institutions underweight these same stocks. Foreign institutions also tend to avoid high dividend-paying stocks. Third, U.S. institutions diverge from non-U.S. foreign institutions in their preference for value over growth stocks, and a tendency to hold stocks in English-speaking countries and emerging markets. Thus, there is generally substantial diversity in the revealed stock preferences of various groups of institutional investors depending on their geographic origin. Another dimension of investor diversity is institution type. We can characterize professional money managers as being of different “colors” in terms of their ability to actively monitor managers’ decisions. Because of potential business ties with the firms in which they invest, not all money managers act as independent shareholders whose only consideration is shareholder value maximization. Following Brickley, Lease, and Smith (1988), Almazan, Hartzell, and Starks (2005), and Chen, Harford, and Li (2007), we divide institutions into two groups: independent institutions (mutual fund managers and investment advisers) and grey institutions (bank trusts, insurance companies, and other institutions). Independent institutions tend to be “pressure-resistant,” while grey institutions tend to be “pressure-sensitive” or loyal to corporate management. For example, following Brickley, Lease, and Smith (1988), find that banks and insurance companies are more supportive of management actions than other types of institutional investors in antitakeover amendment proposals. Using this classification, we first examine similarities and differences in investment preferences that may arise out of distinct investment mandates and objectives. We find that both types of institutions share a preference for large, widely held, and visible stocks consistent with findings in the U.S. market (Bennett, Sias, and Starks, 2003). The results also show that independent managers invest more in firms with liquid stock and firms in countries with strong legal environments, compared to grey managers (especially bank-controlled ones). Next, we examine which colors of investors matter in terms of monitoring and influencing management decisions. We investigate whether there are effects of institutional ownership on firm performance, particularly for different groups of institutions. Monitoring is usually considered to cost less for independent than for grey institutions, because the latter have a disadvantage in pressuring corporate managers for changes, as this may harm their business relationships with the firm (Chen, Harford, and Li, 2007). Similarly, foreign institutional investors are often believed to play more of a role in prompting changes in corporate governance practices than domestic money managers (Gillan and Starks, 2003). We conjecture that the presence of foreign and independent institutions with large stakes has the potential to enhance firm value through direct or indirect monitoring. By direct monitoring we mean the direct intervention of institutions in voicing the interest of shareholders to corporate management (e.g., in proxy contests). By indirect monitoring we mean the effect of institutions on firm valuation if they act as a group to divest their investment in a company, thereby pushing up its cost of capital. As an alternative hypothesis, the valuation gains associated with the presence of foreign and independent institutions can be transitory (rather than permanent), which is consistent with overvaluation or market timing. Recent work by Gozzi, Levine, and Schmukler (2006) and Sarkissian and Schill (2006) suggest that firms that access international markets have transitory valuation gains. To test these monitoring effects, we regress Tobin's Q ratios of our global sample of firms on firm-, industry-, and country-level variables (as in Lins, 2003; Doidge, Karolyi, and Stulz, 2004), and also add the fraction of shares held by different groups of institutional investors. We find that ownership by foreign and independent institutions has a significantly positive impact on firm valuation, unlike ownership by domestic and grey institutions. Because institutional ownership is likely to be jointly determined by firms’ Tobin's Q ratios and driven by other firm characteristics (as revealed by our tests on investor preferences), we re-estimate the Tobin's Q and institutional ownership equations as a system of simultaneous equations. We find consistent evidence of a strong positive relation between firm value and foreign and independent institutional ownership. No similar result obtains for domestic and grey investors. To differentiate monitoring effects and overvaluation effects, we assess whether foreign and independent institutional ownership have a positive influence on a firm's operating performance and investment policy as well. We find a positive association of foreign and independent institutional ownership with return on assets (ROA) and net profit margin (NPM). Furthermore, we find that the presence of foreign and independent institutions also reduces capital expenditures (CAPEX), thereby suggesting that institutional investor pressure curtails a manager's incentives to (over)invest. Substantiating the monitoring interpretation of our findings, there is no similar relation between ownership by domestic and grey institutions and firm performance. We contribute to the literature on corporate governance around the world in speaking to the debate on whether institutional investors’ monitoring and activism are effective. For the U.S., the evidence so far is somewhat mixed. Parrino, Sias, and Starks (2003) find that institutional selling influences the decision of the board of directors to fire a CEO, while Gillan and Starks (2003) find typically modest stock price reactions to shareholder proposals by activist institutions. Other studies show that certain types of institutional investors have some influence on specific corporate events such as antitakeover amendments (Brickley, Lease, and Smith, 1988), research and development expenditures (Bushee, 1998), executive compensation (Almazan, Hartzell, and Starks, 2005), and merger and acquisition decisions (Gaspar, Massa, and Matos, 2005; Chen, Harford, and Li, 2007). Our study of the effects of the colors of the firm's shareholder base in an international capital markets setting is an important contribution to the literature. Other papers analyze firms’ cost of capital and how it is potentially reduced by a larger investor base (Merton, 1987 and Foerster and Karolyi, 1999) and by cross-listing shares in the U.S. as a bonding mechanism (Doidge, Karolyi, and Stulz, 2004; Doidge, Karolyi, and Stulz, 2007b). These authors document a positive valuation effect associated with cross-listing on a U.S. exchange. Our results go one step further to offer a direct link between foreign and independent institutional shareholder presence and firm performance because of the monitoring role these institutions serve. We interpret this positive valuation effect as a form of reputational bonding (Coffee, 2002 and Stulz, 1999) that arises from the presence of highly reputable institutions as large shareholders, rather than the legal bonding associated with a U.S. cross-listing.3 We use a more comprehensive data set than other studies of the revealed preferences of institutional investors: domestic and foreign ownership in a single-destination country (the U.S. as in Gompers and Metrick, 2001; Japan as in Kang and Stulz, 1997; or Sweden as in Dahlquist and Robertsson, 2001); foreign holdings by investors from one single country (U.S. investors as in Aggarwal, Klapper, and Wysocki, 2005; Ammer, Holland, Smith, and Warnock, 2005; Leuz, Lins, and Warnock, 2005); country-level institutional holdings or blockholdings (Chan, Covrig, and Ng, 2005; Li, Moshirian, Pham, and Zein, 2006); holdings from just one class of institutions (mutual funds as in Covrig, Lau, and Ng, 2006); or holdings for a single year. There are, of course, challenges with our data, which we also discuss. The remainder of the paper is organized as follows. Section 2 presents the institutional holdings data, the sample of firms, and other variables. In Section 3, we conduct our tests to determine which firm and country characteristics attract institutional investors. Section 4 studies the valuation effects of different groups of institutions, and also their impact on operating performance and capital budgeting decisions. Section 5 concludes and discusses the implications of our work.

We use a comprehensive database of equity holdings over the 2000–2005 period to investigate the role of institutional investors around the world. Focusing on non-U.S. firms, we document that institutions are becoming prominent shareholders in companies worldwide. Investments by foreign institutions exceed those of domestic institutions in some markets. Foreign capital is not of a single color, in that U.S. and non-U.S. foreign institutions control comparable pools of capital. We offer a global view of what attracts international institutions to invest in corporations around the world. We find that all institutional investors seek large firms and firms with strong governance indicators, but foreigners overweight firms in the MSCI index and firms cross-listed on a U.S. exchange. Some country-level factors are relevant (e.g., all investors prefer countries with strict disclosure standards), but a significant part of the cross-sectional variation in institutional holdings is explained by firm-level characteristics. This suggests that institutional money actively selects which firms to invest in, beyond just following country-level allocations. These findings support a substitution role, rather than a complementary role, for firm-level and country-level mechanisms, at least in institutional investors’ portfolio decisions. This gives additional insights into research showing that firm-level governance levels are in large part driven by country characteristics (Stulz, 2005; Doidge, Karolyi, and Stulz, 2007a). Our findings suggest that investors do track firm-level governance indicators, and there is some hope for a “good firm” in a “bad” country. Our findings suggest that some (but not all) institution groups are effective monitors of the firms they invest in. The presence of foreign and independent institutions enhances shareholder value. These institutions are able to exert pressure because they have fewer business relations with the firm to jeopardize, unlike domestic or grey institutions. Our tests show that firms held by foreign and independent institutions have higher valuations; there is no similar evidence for ownership by domestic and grey institutions. We also document that foreign and independent institutions are associated with better operating performance and reduced capital expenditures. These results are robust in several ways, including the potential endogeneity of institutional ownership. This positive performance effect is indicative of a form of reputational bonding that stems from firms associating with large and independent institutional investors. As foreign and independent institutional investors are increasingly playing an important governance role in corporations around the world, we believe it is worth exploring in more depth the particular ways in which they exert their influence. In this paper we examine outcomes (Tobin's Q, return on assets, net profit margin, capital expenditures) rather than direct corporate choices (research and development expenditures, mergers and acquisitions decisions, CEO turnover and compensation). Institutional shareholders can push for change by directly voicing their interests to corporate management, or indirectly, by influencing managers’ actions by exiting (the “Wall Street walk”). It would be interesting to look at the impact institutional investors have on changes in corporate governance practices in firms around the world as well as their role in specific corporate events.