This paper investigates whether institutional investors influence firms’ investment in real assets and reduce the managerial agency conflict in investment choices. Institutional investors’ holdings of U.S. firms have gone from 10% of shares outstanding in 1960, to well over 60% in 2005. Importantly, given their significant ownership stakes and investment horizons, we expect them to closely moni...

When IPO shares are sold sequentially, later potential investors can learn from the purchasing decisions of earlier investors. This can lead rapidly to "cascades" in which subsequent investors optimally ignore their private information and imitate earlier investors. Although rationing in this situation gives rise to a winner's curse, it is irrelevant. The model predicts that: (1) Offerings succ...

This paper provides a generalization of the theory of shareholder monitoring, originally developed by Admati, Pfleiderer, and Zechner (1994). An activist shareholder can trade with a finite number of strategic passive investors. If there are only a few investors, then their strategic behavior leads to an allocation of shares that increases the activist investor’s incentive to monitor, which is ...

The main objective of this study was to investigate the effect of income smoothing on investors reaction to Earnings Persistence of companies listed on the Stock Exchange in Tehran. The population of the study was companies listed on the Stock Exchange in Tehran, the sample size due to screening method and after removing outliers is equal to 118 companies. In this study, earnings persistence an...

Stochastic Dominance (SD) rules are used to divide the sets of all feasible uncertain prospects into efficient and inefficient sets (partial ordering). The SD rules (as well as the mean-variance rule) assume that investors agree on the available distributions of returns. Laboratory experiments with and without real money repeatedly reveal that even if all subjects observe the same pair of cumul...