Speaker:
Mariassunta Giannetti
Stockholm School of Economics
Discussant:
Oren Sussman
Saïd Business School, University of Oxford
Abstract
Paper Authors: Mariassunta Giannetti and Xiaoyun Yu
We show that following large permanent negative shocks, firms with more short-term institutional investors suffer smaller drops in sales, contract investment and employment to a lower extent, and have better long-term performance than similar firms affected by the shocks. To do so, firms with more short-term institutional investors increase their R&D and advertising expenses and differentiate their products from those of the competitors. Firms with more short-term investors also conduct more diversifying acquisitions and have higher executive turnover in the aftermath of the shocks, suggesting that they put stronger effort in adapting their business to the new competitive environment. Our findings do not appear to be driven by endogeneity of institutional ownership and other selection problems and highlight a potential benefit of short-horizon investors.
