StudentShare solutions
Triangle menu

Institutional ownership and corporate value - Essay Example

Not dowloaded yet

Extract of sample
Institutional ownership and corporate value

Abstract Institutional investors are a significant financial market force. They are rapidly replacing individual investors in the capital market. Unlike individual investors, institutional investors invest large amounts of their company resources into various stocks and shares, thereby devoting many of their resources to monitoring their investment. This paper investigates whether a company’s dividend policy is affected by the level of institutional ownership. The paper focuses on Kuwaiti public companies that are listed on the Kuwait stock exchange (KSE). This study examines the implications of corporate governance on dividend policy. It focuses on the cross-sectional relationship of the organizational ownership structures and dividend payout policies. In this paper, a regression model is employed to explore the link between institutional ownership and cash dividends. The dependent variable, cash dividends, is measured by using two different proxies. The independent variable, institutional ownership, is measured as the natural logarithm of shares held by institutional investors, then scaled by the number of shares outstanding. The control variables include returns on equity, firm size, leverage, firm age, financial loss, year effects, and industry effects. The relevant data is collected from the KSE website and the Institute of Banking Studies in Kuwait (ISB). The monitoring hypothesis suggests that institutional investors tend to function as a superior oversight mechanism, and therefore are more likely to limit corporate managers. The other perspective relates to the entrenchment effect hypothesis, which states that institutional investors may align their interests with management’s interests at the expense of minority wealth. Table of Contents Declaration 2 Acknowledgement 3 Abstract 4 Table of Contents 5 List of Tables 5 Chapter 1: Introduction 7 1.1 Background 7 1.2 Research Question 8 1.3 Aims and Objectives of the Study: 8 1.4 Rationale and Justification for the Study: 9 1.5 Methodology: 9 1.6 Research Structure 10 Chapter 2: Literature Review 12 2.1 Kuwait Stock Exchange 12 2.2 Institutional Ownership and Cash Dividend Payouts 13 2.2.1 The Monitoring Role of Institutional Ownership 14 2.2.2 The Entrenchment Role of Institutional Investors 17 Chapter Three: Hypothesis Development 21 4.2 Regression Models 26 Chapter Five: Data and Results 28 Chapter Six: Conclusions and Implications of the Research 38 Chapter Seven: Future Research 40 List of References 41 List of Tables Table 1: Frequency of Institutional Investors over Time 29 Table 2: Descriptive Statistics for the Dependent, Independent, and Control Variables 330 Table 3: Pearson Correlation Coefficients, N = 648 323 Table 4: Regression Results of the Dependent Variable: CashPayOut 345 Table 5: Regression Results of the Dependent Variable: CashDiv_Earnings 368 Chapter 1: Introduction 1.1 Background Institutional investors are a significant financial market force. They are rapidly replacing individual investors in the capital market. Unlike individual investors, institutional investors invest large amounts of their company resources into various stocks and shares, thereby devoting many of their resources to monitoring their investment (Grossman and Hart, 1980; Shleifer and Vishny, 1986). In addition, institutional investors are generally more and better informed then individual invest ...Show more


Declaration I have tried my best to consider every aspect of ethics while conducting this research and I did not perform any unethical act, which can damage reputation of my university and family. [Name of Student] Acknowledgement I praise the Lord Allah almighty the most compassionate and the most merciful for his bless…
Author : dstrosin
Institutional ownership and corporate value essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Institutional ownership and corporate value"
with a personal 20% discount.
Grab the best paper

Related Essays

Corporate Governance and Ownership
This paper discusses how globalization brings about changes to the corporate governance in East Asia. This paper examines the recent change or governmental reformation of Japan, China and Singapore in terms of corporate ownership structure and governance.
32 pages (8000 words) Essay
Corporate governance and ownership reforms in Japan
The paper will study traditional forms of Japanese corporate governance and compare these with modern forms of corporate governance. The paper will also examine the dissolving of traditional ownership models and the effects of foreign investors on Japanese firms through data retrieved from records of companies listed on the Tokyo Stock Exchange (TSE).
24 pages (6000 words) Essay
The development of institutional investors, and their growing dominance as owners of modern corporations, has had a deep impact
It is estimated that in 2009, the total financial assets managed by institutional investors worldwide exceeds US$ 53 trillion, of which US$ 22 trillion of which is in equities. The implication is that company oversight, as well as the entire corporate governance system, will depend on the degree to which institutional investors make informed use of their shareholder rights and effectively exercise their roles as corporate owners.1 The role of institutional investors as overseers of corporate health and regulatory compliance has been drawn into sharper focus as a result of the financial crisis in 2008.
15 pages (3750 words) Essay
What Is The Likely Influence Of Institutional Investors On Corporate Social Performance
In today's competitive market atmosphere, business is dealing with a new set of challenges that are not merely economics-related. To endure and flourish, firms should link economic and social systems. And to achieve this aim a system was introduced known as Corporate Social Responsibility (CSR).
5 pages (1250 words) Essay
Relationship between ownership structure, investment and corporate value
Early on, Jensen and Meckling (1976) have examined the effect of management and their behavior on the performance and the corporate value they control. A huge part
6 pages (1500 words) Essay
The impact of institutional Ownership on dividend policy: The Case of Kuwait
In contrast to individual investors, the institutional investors are more and better informed. The institutions are more devoted and put in more resources to get information and sometimes the information known
12 pages (3000 words) Essay
Also, institutional investors are generally more and better informed than individual investors due to their unique skills and abilities to get access to private
5 pages (1250 words) Essay
Ownership structure and Firm performance: evidence from GCC countries
Ordinary least square (OLS) with fixed effects panel models are employed. The analysis is done using two measures of performance including return on assets (ROA) and Tobin’s Q. The impact of firm specific variables such
2 pages (500 words) Essay
Ownership Structure and Financial Performance
In this regard, firstly the paper examines the dimensions of ownership structures. Ownership structure is distinguished on the basis of two measures including ownership identity and ownership concentration. Ownership identify is related to the real owners of the business and ownership concentration reflects the proportion of voting shares held by owners of the business.
7 pages (1750 words) Essay
Assess the importance of institutional investors for financial markets
tutional investors who invest in securities include insurance companies, banks, mutual funds, hedge funds, pension funds, investment advisors and operating companies that invest a percentage of their profits on investment assets. According to Deng and Xu (2011), institutional
8 pages (2000 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation