Effects of Institutional Investors’ Monitoring Characteristics on Bond Ratings
Effects of Institutional Investors’ Monitoring Characteristics on Bond Ratings
이상철(School of Business, Ewha Womans University)
29권 3호, 61~87쪽
초록
[Purpose]This study empirically verifies the effects of institutional investors’ monitoring characteristics on bond ratings. To meet this research goal, I investigate whether the existence of institutional investors as independent block shareholders, who have the incentive and expertise to monitor firm managers independently, increases bond ratings. At the same time, I examine whether the investment horizon of institutional investors－a measure of experience and expertise for institutional investors to monitor investee’s management－increases bond ratings. [Methodology]Among the outside institutional investors that are not related to investee firms, I categorized institutional investors whose shares represent 5% or more as outside block institutional investors. Using a sample of 6,550 non－financial firm－year data points from companies listed on the Korea Stock Exchange for 2003－2014, I perform multiple regression models to verify the effects of both the existence of outside block institutional investors and the length of the investment horizon on bond ratings. [Findings]I find that both the existence of institutional investors as an independent block shareholders and the investment horizon of institutional investors are positively related to bond ratings. In addition, the effect of outside block institutional investors on bond ratings is stronger than the impact of the investment horizon of institutional investors. Furthermore, the impact of the investment horizon of institutional investors on bond ratings is more powerful in firms with outside block institutional investors than in companies without them. [Policy Implications]The regulatory authorities may need to review current regulations and create new conditions that will facilitate the roles of institutional investors in the Korean capital market. In addition, the findings of this study suggest that institutional investors’ monitoring characteristics should be incorporated into the credit rating process.
Abstract
[Purpose]This study empirically verifies the effects of institutional investors’ monitoring characteristics on bond ratings. To meet this research goal, I investigate whether the existence of institutional investors as independent block shareholders, who have the incentive and expertise to monitor firm managers independently, increases bond ratings. At the same time, I examine whether the investment horizon of institutional investors－a measure of experience and expertise for institutional investors to monitor investee’s management－increases bond ratings. [Methodology]Among the outside institutional investors that are not related to investee firms, I categorized institutional investors whose shares represent 5% or more as outside block institutional investors. Using a sample of 6,550 non－financial firm－year data points from companies listed on the Korea Stock Exchange for 2003－2014, I perform multiple regression models to verify the effects of both the existence of outside block institutional investors and the length of the investment horizon on bond ratings. [Findings]I find that both the existence of institutional investors as an independent block shareholders and the investment horizon of institutional investors are positively related to bond ratings. In addition, the effect of outside block institutional investors on bond ratings is stronger than the impact of the investment horizon of institutional investors. Furthermore, the impact of the investment horizon of institutional investors on bond ratings is more powerful in firms with outside block institutional investors than in companies without them. [Policy Implications]The regulatory authorities may need to review current regulations and create new conditions that will facilitate the roles of institutional investors in the Korean capital market. In addition, the findings of this study suggest that institutional investors’ monitoring characteristics should be incorporated into the credit rating process.
- 발행기관:
- 한국회계정책학회
- 분류:
- 회계학