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Why do large shareholders adopt a short‐term versus a long‐term investment horizon in different firms?
Author(s) -
Tosun Onur Kemal
Publication year - 2019
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12198
Subject(s) - dividend , leverage (statistics) , shareholder , ordinary least squares , panel data , term (time) , investment (military) , economics , capital call , monetary economics , time horizon , logistic regression , horizon , business , econometrics , finance , microeconomics , corporate governance , mathematics , statistics , profit (economics) , physics , geometry , individual capital , quantum mechanics , politics , financial capital , political science , law
I ask why the same large shareholders have different investment horizons. Using data for 1998–2013, I examine four fundamental firm policies for their potential influence on blockholders’ investments with different time horizons. The panel ordinary least squares, difference‐in‐difference (using the Sarbanes‐Oxley Act), logistic, and dynamic generalized method of moments regression analyses reveal that blockholders adopt a short‐term horizon in smaller firms with a less independent board, high leverage, and high dividends while the same blockholders keep their investments longer in firms with a more independent board and low dividends. Under various economic conditions, different firm characteristics gain importance in blockholders’ decision on short‐term versus long‐term investments.