Foundations of Factor Investing

This study examines the impact of investors’ buy and sell trades on Korean stock market volatility across two crisis events, the Asian crisis of 1997 and the 2008 global financial crash. We investigate the trading behaviour of domestic vs. foreign and institutional vs. individual investors. Our results suggest that the buy and sell trades have an asymmetric effect on volatility that depends on the type of investor trading and on the phase of the business cycle. Buy orders appear to be more informative than sell orders since they mostly lower volatility in the pre‐crisis periods, while sell and post‐crisis buy trades affect volatility positively regardless of who trades (institutional or individual investors) and on what information (member, non‐member). Most importantly, decomposing total buy and sell trades into trader‐type categories reveals that some institutional investors are more informed traders that stabilize the market compared to individuals that always increase volatility. Foreign investors reduce volatility with their purchases and total trading activity in the whole Asian crisis sample, but only in the pre‐crisis period before the recent global financial turmoil.

This study investigates whether institutional investors moderate the relationship between ethical commitment and financial performance amongst Malaysian companies. Through the role of institutional investors, the external monitoring mechanism is expected to reduce the cost associated with the agency problem amongst Malaysian companies, as shown by the lack of ethical practises. Using data from 429 publicly listed companies on the Main Board of Bursa Malaysia from 2012 to 2021, the results show that companies with higher ETHICS have better financial performance than companies with lower ETHICS. However, the findings on the moderating effect of institutional investors cannot be proven. By separating the sample based on pre‐MCCG 2017, institutional investors were found to have an association between ETHICS and performance, but no evidence was found during the period post‐MCCG 2017. This study adds to the perspective of agency theory in the academic literature, of which companies can create values by being committed to higher ethical practises. Results on the moderating effect of institutional investors provide perspective on external monitoring mechanisms in the Malaysian market because they are found to have a monitoring role in enhancing corporate performance. However, such a role decreases after the introduction of MCCG 2017. This study provides insights for Malaysian regulators on the necessity to keep promoting ethical practises and transparency amongst companies to achieve the goals of the National Anti‐Corruption Plan 2019–2023. The ethical practises, however, are not limited to listed companies, and regulators should also consider monitoring the institutions within the capital market.

Academic evidence shows that low-volatility stock portfolios earn high risk-adjusted returns. Several asset managers have created mutual funds that target this specific segment of the stock market. MSCI launched a minimum volatility index in April 2008, which, in hindsight, was good timing. This new low-volatility investment style is gaining momentum among institutional investors, especially since the experience of the financial crises. Based on experience with low (or minimum) volatility research and running low-volatile equity portfolios for our clients, the author summarizes 10 important things that potential investors should know about minimum volatility investing. <b>TOPICS:</b>Mutual funds/passive investing/indexing, volatility measures, style investing

PurposeThe purpose of this paper is to study the impact of institutional shareholdings on earnings management activities of their portfolio firms.Design/methodology/approachUsing a final sample of 94 top firms on the Bursa Malaysia based on market capitalization as at 31 December 2007, this paper uses the magnitude of discretionary accruals as the proxy for earnings management. The paper measures the aggregate institutional ownership percentage of shareholdings of the five top institutional investors which are further divided into two categories: pressure sensitive consisting of percentage ownership by banks and insurance companies; and pressure insensitive institutional investor consisting of percentage shareholdings by unit trusts, pension funds and state‐owned institutions. Data were collected over a six‐year period from 2002 to 2007. The year it started was also when all the listed companies in Bursa Malaysia started adopting the MCCG requirements as mandatory reporting in annual reports.FindingsThe results show that only Malaysia Shareholders Watchdog Group (MSWG) institutional shareholdings are effective in mitigating self‐serving earnings management behavior of their portfolio firms. Within MSWG shareholdings, Permodalan National Berhad (PNB) is the most effective institutional shareholder in mitigating opportunistic earnings management behavior. Overall, the findings suggest that ownership may not be enough to mitigate earnings management. Firms may have to engage in shareholder activism such as through proxy voting and establishing direct dialogues with management in order to preserve the value of their investments.Research limitations/implicationsOne of the limitations in this study is measurement error which is a critical problem for studies on earnings management. Hence, this study inherits all the limitations of the Jones model although it is noted that it and the modified Jones model are extensively used in earnings management literature. Overall, this study provides empirical evidence to assess the merits of calls for institutional investors to play a greater role in portfolio firms' corporate governance practice in Malaysia. In essence, the results from the study provide evidence that ownership alone is not enough and institutional investors need to be involved in shareholder activism in order to be effective as an external monitor. In other words, by engaging in shareholder activism, institutional investors would be better able to safeguard the value of their investment. Moreover, the size of their shareholdings should provide powerful incentive for them to monitor their investee firms.Originality/valueThis is the first published paper that focuses on institutional investors and earnings management in Malaysia, as previous studies have focused more on developed countries. This study aims to provide empirical evidence on the effectiveness of institutional investors in mitigating opportunistic earnings management, in order to ascertain their generalizability to developing countries like Malaysia.

Institutional Trading, Information Production, and Corporate Spin-Offs

As external governance factors, institutional investors' governance mechanisms and governance effect have been focus areas of research. Based on the data of A‐share listed companies in the Shenzhen Stock Exchange from 2013 to 2019, this study discusses the impact of institutional investors' site visits on capital market information efficiency. The study finds that institutional investors' site visits can significantly reduce stock price synchronicity, indicating the potential of site visits to improve capital market information efficiency. Market attention can play an amplifying role in the relationship between institutional investors' site visits and stock price synchronicity, which manifests as their sensitivity enhancement. Further, institutional investors' site visits are more effective for reducing stock price synchronicity in non‐state‐owned enterprises and those in areas with low marketization. Moreover, institutional research increases information asymmetry between investors. This study demonstrates the positive role of institutional research from the perspective of capital market information efficiency and confirms the effectiveness of institutional investors as external governance factors.

This article reviews the active management opportunity in different market segments, and discusses the role of very active mandates across segments in a core–satellite portfolio structure. Research based on manager performance data over the last 10 years indicates that there is little evidence that average emerging market or small-cap managers have produced higher or more persistent risk-adjusted returns relative to their developed market large-cap peers. Therefore, institutional investors may consider active and passive management as complementary strategies across all equity segments. Due to the outperformance of high active risk mandates over the analyzed period, a simulated core–satellite structure across different equity segments achieved a higher information ratio than a combination of low active risk managers. The outperformance of high active risk mandates may reflect links between higher manager skill, higher investment conviction, and/or fewer constraints. Depending on investment beliefs, institutional investors might explore such a core–satellite structure to implement the global equity allocation.

Guided by the evidence that insiders and institutional investors are better informed, I comprehensively investigate the trading behavior and ownership of insiders and institutional investors in Taiwan in an attempt to differentiate between the two types of investors. Insiders gain profits from their filing of selling shareholdings and institutional investors acquire abnormal returns from block trades. Insider and institutional ownership both show positive effects on performance. Firms with high institutional ownership have higher performance, but not lower volatility. The results remain by considering the endogeneity issue and alternative measures of performance. These findings provide evidence that the efficient monitoring effect is more significant than the convergence of interest effect.

A unified framework for exploring the determinants of online social networks (OSNs) on institutional investors’ capital market investment decision

Can BlackRock Save the Planet? The Institutional Investors’ role in Stakeholders Capitalism

Reexamination of the Relationship between Institutional Ownership Horizon and Corporate Social Responsibility

Guiding institutional investors to actively participate in corporate governance is a hot issue to improve the internal governance of China’s listed companies. This study seeks to provide a comprehensive understanding of the mechanism that underlies the governance effects of the heterogeneity of institutional investors on the cost of capital, and the influence of ownership structure on the relationship between them. Using an unbalanced panel data on A-share listed companies of Shanghai and Shenzhen in China’s capital market during the 2014–2019 period, this study reveals how institutional investors with longer holding period and higher shareholding ratio are negatively associated with the cost of capital in China’s capital market. Furthermore, this study successfully confirms the moderating effect of ownership structure in the relationship between institutional investors and the cost of capital. China’s state-owned enterprises are more likely to introduce improvements at the corporate governance level, and ownership concentration weakens the negative influence of institutional investors on the cost of capital. The research contributes to a deeper understanding of the impacts of institutional investor’s heterogeneity and ownership structure on the cost of capital in China. In the process, the study yields useful implications for the theory and practice of corporate governance.

The aim of the article is to study the efficiency and features of management of marketing activities in enterprises. Analyzing the latest research and publications of scholars, the general theoretical foundations of the features of management of marketing activities at enterprises are considered. The article highlights and theoretically substantiates the efficiency and features of management of marketing activities of enterprise, taking into account the conditions of martial law. In the context of the introduction of market relations in Ukraine, there is a need for a new business culture, one of the carriers of which is marketing. Due to the fact that competition in the market is increasing, entrepreneurs must organize economic activities in such a way that the highest results are achieved, and the relevant costs are the lowest possible. Business conditions have become much tougher, commercial activity is significantly reduced, and consumer interest in shopping is significantly reduced. Because of this, it is necessary to adapt in time and deal with the challenges that entrepreneurs face every day. That is why adaptation on the basis of marketing is one of the most important ways to continue your own business. In this regard, a modern enterprise should primarily focus on economic effectiveness. This can be achieved only by prioritizing the interests of the consumer. However, it should be remembered that only copying the experience of marketing activities of Western countries cannot bring the expected results within the framework of domestic realities. In addition, we should not forget that there is a war going on in the country, and all this has a significant impact on marketing activities. Undoubtedly, people are trying to save more and analyze their purchases more carefully, dividing them into what you can and cannot do without. That is why it is worth offering only high-quality products that are currently popular. It should be noted that in the conditions of crisis, only those enterprises that act actively and apply a set of measures to manage the enterprise on the basis of marketing, using marketing tools, survive and function.

Institutional investors, as crucial participants in the capital market, we examine the impact of corporate environmental litigation risks on their investment behavior, under the background of the “Two-Carbon target”. We find that institutional investors significantly reduce their holdings in corporate with high environmental litigation risks, after the establishment of intermediate environmental court. Firms can mitigate environmental litigation risks by implementing voluntary environmental regulations. Further, improvements in environmental justice affect institutional investors’ investment behavior by influencing the status of environmental judicial cases in the region and enhancing environmental administrative supervision. As for investor heterogeneity, firms with higher levels of social and environmental responsibility are more in line with green institutional investors, who care environmental protection. Private and small enterprises can enhance their comparative competitive advantage in green investment development by shouldering social and environmental responsibilities actively.

Recently with rapid growth of China's institutional investors, they are gradually becoming the dominant force in capital market. At the same time they start exerting influence on corporate governance and affecting corporate performance. Many previous studies have shown institutional investors’ holdings are positively correlated to corporate performance. However there are still many studies holding opposite opinions. This article further studies how institutional investors influence corporate performance and whether they have effects on corporate governance. On the whole, we come to the conclusion that participation of institutional investors promotes the improvement of corporate performance. These conclusions provide theoretical and practical guidance to future development of institutional investors.