The determinants of international equity investment: Do they differ between institutional and noninstitutional investors?

In this paper we investigate whether the determinants of international equity investment differ between investors with different degrees of sophistication. For this purpose, we analyse and compare the determinants of international equity investment of institutional and noninstitutional investors from 20 OECD countries (US not included) in the period 2001-2009. The results show that there are significant differences in the determinants of international equity investment between institutional and noninstitutional investors. In particular, noninstitutional investors tend to exhibit a more pronounced preference for equities of geographical nearby, contiguous and more transparent countries than institutional investors. The preference for more developed equity markets and the contrarian behaviour are also significantly more pronounced for noninstitutional than for institutional investors. These results support the argument that international equity investment of less sophisticated investors is more affected by information costs and familiarity than that of more sophisticated investors. Moreover, business cycles exert an influence on international equity investment decisions of both institutional and noninstitutional investors.

The determinants of international equity and bond investment

The purpose of this research is fourfold. First, to investigate whether the determinants of international equity investment differ between investors with different degrees of information, experience and sophistication. For this purpose, the determinants of international equity investment of institutional and noninstitutional investors from 20 OECD countries, in the period 2001-2009, were analysed and compared. The results show that there are significant differences in the determinants of international equity investment between institutional and noninstitutional investors. Particularly, noninstitutional investors exhibit a more pronounced preference for equities of geographical nearby, contiguous and more transparent countries than institutional investors, suggesting that the effect of information costs and familiarity on international equity investment is stronger for less informed, experienced and sophisticated investors. Moreover, the preference for more developed equity markets and the contrarian behaviour are more severe for noninstitutional investors. Hence, the heterogeneity of institutional and noninstitutional investors in international equity investment is not negligible and therefore should be taken into account. Second, to investigate whether the determinants of international bond investment differ between investors with different degrees of information, experience and sophistication. For this purpose, the determinants of international bond investment of institutional and noninstitutional investors from 20 OECD countries, in the period 2001-2009, were analysed and compared. The results show that there are few significant differences in the determinants of international bond investment between institutional and noninstitutional investors. Particularly, the preference for bonds of more transparent countries and the return chasing behaviour are more pronounced for noninstitutional investors, whereas the preference for bonds with lower risk diversification potential is more pronounced for institutional investors. Hence, not only the results for international bond investment do not allow to support (or reject) the argument that information costs and familiarity are more important for less informed, experienced and sophisticated investors, but also they are contrary to the idea that financial variables, namely return and risk diversification, are more important for more informed, experienced and sophisticated investors. Third, to investigate whether the determinants of international equity investment differ from the determinants of international bond investment. For this purpose, the determinants of both international equity and bond investment of institutional and noninstitutional investors from 20 OECD countries, in the period 2001-2009, were analysed and compared. The results show that, although the effect of information costs on international equity investment tends to be stronger than on international bond investment, the differences between assets are not usually statistically significant, especially when the influence of financial variables is taken into account. Hence, it is not possible to conclude that international equity investment is much more information intensive than international bond investment, as suggested by Gehrig (1993) and Portes, Rey and Oh (2001), among others. Fourth, to investigate whether the flight to quality phenomenon is also observable in international investment and whether the flight to quality phenomenon is more pronounced for more sophisticated than for less sophisticated investors. For this purpose, a two-factor and three-factor ANOVA models, respectively, were applied to the international equity and bond investment of institutional and noninstitutional investors from 20 OECD countries in the period 2001-2009. The results suggest that the flight to quality phenomenon is also observable in international investment, as a change from business cycle of expansion to recession causes investors to significantly decrease the average weight invested in more risky assets (equities) and increase the average weight invested in less risky assets (bonds). The results also show that the variation on the average weight assigned to each type of asset, due to changes in business cycles, is significantly stronger for institutional investors than for noninstitutional investors, thereby suggesting that the flight to quality phenomenon is more pronounced for more sophisticated than for less sophisticated investors.

A relevância do relatório de auditoria para os investidores institucionais, analistas financeiros e analistas de crédito

In the 70s, a new line of research focused on the study of the influence of the audit report on the decision process of investors, financial analysts and credit analysts. Notwithstanding the numerous studies that have been carried out, results have not been consistent. Given the above, and considering the lack, in Portugal, of a research of this nature, it seems urgent to carry out a study that allows the analysis of the use of the audit report, as well as its influence on the decision making process of Portuguese stakeholders. For that purpose, in the light of the positivist research paradigm, a questionnaire was designed, which was administered by mail and on the Survey Monkey platform to a sample of institutional investors, financial analysts and credit analysts. The statistical analysis of the data obtained was undertaken with resource to the Statistical Package for the Social Sciences and SmartPLS 2.0. Corroborating the literature review and the assumptions of the Agency Theory and the Stakeholder Theory, used in the theoretical framework of analysis, empirical evidence has shown that the audit report influences the decision of institutional investors, financial analysts and credit analysts, and that the opinion expressed in that document is the most determinant factor of this influence. In addition to this factor, it was found that the degree of utilization of the audit report, as well as the value ascribed to this document, determine its influence in the decision process of research groups studied. Only in the case of institutional investors, the results did not reveal a correlation between the utility ascribed to the audit report and the influence of this document in their decision making process. In turn, the statistical inference of the model explaining the degree of use of the audit report revealed that it is conditioned by the perceived quality of the information enclosed in the audit report, the utility assigned to the audit report on the decision process, as well as the relevance of the other sources of information used by stakeholders. Therefore, this study allowed proving the importance of the audit report to its users. As a result, we believe to have filled a gap in national literature and to have contributed to the enhancement of international literature. The importance that this document has for the development of any country is, therefore, shown, and it is urgent to maintain rigor in the selection of its staff, in the development of its standards, and especially in the development of audits. Moreover, we also consider that this research may contribute to the improvement of the audit report, insofar as it will help professional bodies to understand the information needs and perceptions of stakeholders.

The Museum Of All: Institutional Communication Practices in a Participatory Networked World

The Museum Of All: Institutional Communication Practices in a Participatory Networked World