Short-Term Institutional Investors and the Diffusion of Supply Chain Information

52 Pages Posted: 12 Nov 2018 Last revised: 29 Jan 2019

See all articles by Rui Duan

Rui Duan

York University - Schulich School of Business

Yelena Larkin

York University - Schulich School of Business

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Date Written: January 24, 2019

Abstract

This paper investigates how a firm's customer base shapes its investor clientele. We show that more concentrated customer base is associated with higher holdings of short-term, but not long-term, institutional investors. The results remain unchanged after addressing endogeneity concerns and considering short sellers as short-term investors. This evidence is consistent with the public information transfer channel, where short-term investors are able to process public, but slowly diffusing, supply chain information ahead of other market participants. Further evidence suggests that the link between customer concentration and short-term institutional ownership is stronger in the environment of high information asymmetry, as well as after the passage of Reg FD reform. Overall, our results suggest that the implications of a concentrated customer base extend beyond their impact on the product market space and key firm characteristics, and affect shareholder composition.

Keywords: customer concentration, institutional investors, investor horizons, information, liquidity

JEL Classification: G11, G14, G23

Suggested Citation

Duan, Rui and Larkin, Yelena and Ng, Lilian, Short-Term Institutional Investors and the Diffusion of Supply Chain Information (January 24, 2019). Available at SSRN: https://ssrn.com/abstract=3277201 or http://dx.doi.org/10.2139/ssrn.3277201

Rui Duan (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Yelena Larkin

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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