Institutional ownership, analyst following, and share prices

    Authors

    C. S. Fernando; V. A. Gatchev;P. A. Spindt

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    J. Bank Financ.

    Keywords

    Institutional ownership; Monitoring; Analysts; Financial intermediation; Share price level; Firm value; MUTUAL FUND PERFORMANCE; BID-ASK SPREADS; STOCK SPLITS; TOBIN-Q; PORTFOLIO DIVERSIFICATION; SHAREHOLDER ACTIVISM; CORPORATE GOVERNANCE; EQUITY PRICES; TICK SIZE; INVESTORS; Business, Finance; Economics

    Abstract

    We study the mutual relationships between institutional ownership, analyst following and share prices. We show that the pressure on firms to set lower share prices to attract analysts is attenuated by institutional monitoring. Our theory refutes the assumed causal relation between share price and institutional ownership, attributed to the share price-liquidity relation, and we show empirically that share prices and institutional ownership are positively related after controlling for liquidity. Our study provides a rationale for why better firms generally maintain higher share price levels, and offers new insights into the puzzling empirical linkages observed between nominal share price levels and firm fundamentals. (C) 2012 Elsevier B.V. All rights reserved.

    Journal Title

    Journal of Banking & Finance

    Volume

    36

    Issue/Number

    8

    Publication Date

    1-1-2013

    Document Type

    Article

    Language

    English

    First Page

    2175

    Last Page

    2189

    WOS Identifier

    WOS:000305865800001

    ISSN

    0378-4266

    Share

    COinS