INSTITUTIONAL OWNERSHIP AND FINANCIAL FLEXIBILITY

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MEHRANI SASAN; MORADI MOHAMMAD; ESKANDAR HODA; HASHEMI M. MOHAMMAD JAVAD

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Journal Paper

Paper Information

Journal: The Financial Accounting and Auditing Researches Year:2016 | Volume:7 | Issue:28 Page(s): 43-56

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Information Journal Paper

Title

INSTITUTIONAL OWNERSHIP AND FINANCIAL FLEXIBILITY

Author(s)

MEHRANI SASAN | MORADI MOHAMMAD | ESKANDAR HODA | HASHEMI M. MOHAMMAD JAVAD | Issue Writer Certificate

Keywords

INSTITUTIONAL OWNERSHIPQ2

FINANCIAL FLEXIBILITYQ1

ACTIVE MONITORING HYPOTHESISQ3

PRIVATE BENEFITS HYPOTHESISQ3

Abstract

Manager may make financial decisions inconsistent with shareholders. Institutional owners may lead to change firms' behavior (including financial policies) because of their ownership and monitoring the managers. Furthermore, a significant relationship between INSTITUTIONAL OWNERSHIP and decisions concerning on FINANCIAL FLEXIBILITY is expected. This study investigates this relationship by measuring dependent variable with liquidity and leverage proxies. Regression analysis is used for testing this relationship and model fitness. Time period is from 2012 to 2014.Findings show that INSTITUTIONAL OWNERSHIP is positively correlated with the following proxies. Institutional owners lead firms to be more flexible. This is consistent with ACTIVE MONITORING HYPOTHESIS. Moreover, more concentrated INSTITUTIONAL OWNERSHIP, less flexibility. This is consistent with PRIVATE BENEFITS HYPOTHESIS.

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