Institutional investors, financial health, and equity valuation

Dan S Dhaliwal, Oliver Zhen Li, Hong Xie

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We investigate the relation between institutional ownership, financial health, and the market valuation weights on earnings and the book value of equity. We find that the valuation weight on earnings (book value) increases (decreases) with the level of institutional ownership for profit firms, while that on book value increases with the level of institutional ownership for loss firms. This valuation effect is not subsumed by incorporating current measures of financial health and is mainly driven by institutions with long investment horizons and monitoring incentives. We conclude that the institutional valuation effect is consistent with institutions playing a positive governance role.

Original languageEnglish (US)
Pages (from-to)151-173
Number of pages23
JournalAsia-Pacific Journal of Accounting and Economics
Volume17
Issue number2
StatePublished - Aug 2010

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Financial health
Institutional investors
Equity valuation
Institutional ownership
Book value
Valuation effects
Market valuation
Monitoring
Equity
Incentives
Governance
Investment horizon

Keywords

  • Equity valuation
  • Financial health
  • Institutional ownership

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Accounting

Cite this

Institutional investors, financial health, and equity valuation. / Dhaliwal, Dan S; Li, Oliver Zhen; Xie, Hong.

In: Asia-Pacific Journal of Accounting and Economics, Vol. 17, No. 2, 08.2010, p. 151-173.

Research output: Contribution to journalArticle

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