Mardi | 2017-11-28
Salle des thèses 16h – 17h20
Panayiotis ANDREOU – Franco FIORDELISI – Terry HARRIS – Dennis PHILIP
This paper develops a measure of competition orientation based on textual analysis of managements’ disclosures in their 10-K filings. Using this measure, we provide evidence regarding institutional investors’ preferences and behind‐the‐scenes interventions. In particular, we show that transient institutional ownership intensifies firms’ competition orientation, while dedicated institutional ownership lessens it. Further, we demonstrate that as firms intensify competition orientation, they also become more susceptible to stock price crash risk, a phenomenon observed among such firms with a high proportion of transient, and a low proportion of dedicated, institutional ownership. These findings have policy implications, since they identify firms’ competition orientation as a channel through which transient institutional investors influence firms’ decision-making and economic outcomes, albeit at the expense of shareholder value creation.