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Institutional investors’ horizons and bank transparency

Lookup NU author(s): Dr Shams PathanORCiD

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Abstract

© 2023 The Authors. Journal of Business Finance & Accounting published by John Wiley & Sons Ltd. We examine the relation between institutional investors’ horizons and bank transparency. The novelty of this research is to consider three important aspects of transparency: disclosure quality, private information gathering and auditor fees. We find strong evidence indicating that banks dominated by long-term (short-term [ST]) institutional shareholders exhibit higher (lower) levels of disclosure quality. However, there is no evidence that investor horizon has a differential effect on private information gathering and audit pricing. The study employs alternative proxies and estimations such as two-stage least squares and propensity score matching to address endogeneity. We also document that banks with higher ST institutional shareholding are associated with lower crash risk. These findings are particularly significant because poor bank transparency has been identified as a contributing factor to the 2007–2009 financial crisis.

Publication metadata

Author(s): Haq M, Pathan S, Mendez CF, Lobo GJ

Publication type: Article

Publication status: Published

Journal: Journal of Business Finance and Accounting

Year: 2023

Pages: Epub ahead of print

Online publication date: 24/09/2023

Acceptance date: 04/08/2023

Date deposited: 21/12/2023

ISSN (print): 0306-686X

ISSN (electronic): 1468-5957

Publisher: John Wiley and Sons Inc.

URL: https://doi.org/10.1111/jbfa.12749

DOI: 10.1111/jbfa.12749

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