Effects of institutional investors on operations factors

Abstract

The purpose of this paper is to investigate the relationship between institutional ownership and operations factors empirically. In many countries, institutional investors have become dominant players in corporate governance as well as in the financial market. I examine the heterogeneity of institutional investors focusing on the investment horizon. Institutional investors perceive inventory and PPE differently depending on their preferences because they have two divergent views - one underscoring resource efficiency and the other accentuating the value of resource slack. With the analysis of a large panel data set of U.S manufacturing companies, long-term perspective institutional investors are associated with the higher level of inventory and PPE in the same industry. On the contrary, short-term perspective institutional investors moderate the relationship between the long-term ownership and the relative level of inventory and PPE negatively. Research contributions and managerial implications are discussed, and several opportunities for future research are drawn.