Institutional investors’ activism and credit ratings
Institutional investors’ activism and credit ratings
We study the link between institutional shareholdings and the quality of the credit ratings of the firms they hold in their investment portfolio. The study of the overall impact of institutional investor ownership yields mixed results while more consistent results are obtained when we take into account the heterogeneity of institutional investors. When we classify the institutional investors based on their degree of intervention and activism levels, we find that passive/inactive investors are associated with better-rated firms while active ones are associated with lower-rated firms. Thus, activist institutional investors believe that there is more value to be found at lowly rated firms. They are more likely to find cheap stocks among these firms that require both their financial and managerial inputs to progress. Passive investors, instead, tend to track market indices that consist of mostly highly rated firms.
institutional investors, credit ratings, active investors
1-27
Farooqi, Javeria
89427a1b-b742-4c3e-b978-b8c57de2b774
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
2015
Farooqi, Javeria
89427a1b-b742-4c3e-b978-b8c57de2b774
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Farooqi, Javeria, Jory, Surendranath and Ngo, Thanh
(2015)
Institutional investors’ activism and credit ratings.
Journal of Economics and Finance, .
(doi:10.1007/s12197-015-9332-8).
Abstract
We study the link between institutional shareholdings and the quality of the credit ratings of the firms they hold in their investment portfolio. The study of the overall impact of institutional investor ownership yields mixed results while more consistent results are obtained when we take into account the heterogeneity of institutional investors. When we classify the institutional investors based on their degree of intervention and activism levels, we find that passive/inactive investors are associated with better-rated firms while active ones are associated with lower-rated firms. Thus, activist institutional investors believe that there is more value to be found at lowly rated firms. They are more likely to find cheap stocks among these firms that require both their financial and managerial inputs to progress. Passive investors, instead, tend to track market indices that consist of mostly highly rated firms.
This record has no associated files available for download.
More information
Published date: 2015
Keywords:
institutional investors, credit ratings, active investors
Organisations:
Faculty of Business, Law and Art
Identifiers
Local EPrints ID: 399830
URI: http://eprints.soton.ac.uk/id/eprint/399830
ISSN: 1055-0925
PURE UUID: 23028379-89da-4c26-adb6-107a905dd656
Catalogue record
Date deposited: 30 Aug 2016 11:44
Last modified: 15 Mar 2024 03:45
Export record
Altmetrics
Contributors
Author:
Javeria Farooqi
Author:
Thanh Ngo
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics