The relationship between institutional investment horizons and firm-level productivity
Abstract
This study examines the impact of institutional investment horizons on firm-level productivity. Using a sample of listed U.S. firms in the period 1980 – 2017, I document statistically significant evidence suggesting that higher percentage of dedicated institutional ownership increases total factor productivity while the conclusion is opposite for transient institutional ownership. Additionally, the results also suggest that if dedicated (transient) institutions face less competition in controlling firms, they help firms increase (decrease) firms’ productivity. In addition, I find that firms with higher numbers of both types of institutions exhibit slightly higher productivity. This paper contributes to the productivity literature by introducing institutional investment horizons as a new driver for firm-level productivity.