Institutional Investor Heterogeneity and Corporate Response to the Covid‐19 Pandemic

ABSTRACT: Abstract We examine the role of institutional investors in determining firms’ decisions whether to reduce dividends and share buybacks during the Covid‐19 pandemic. Our simple model predicts that the probability of cuts in payouts is linked to the holdings and types of institutions. We link our model to the attention‐based theories of the firm. We posit that the highly proximate nature of the pandemic may encourage greater risk aversion in organizations. Consequently, the presence of institutions that actively engage with managers results in a reduction in shareholders’ payouts during the pandemic to enable firms to deal with increased uncertainty, while institutions that seek short‐term value releases reduce the probability of cuts. We test our hypotheses using novel hand‐collected data o

SUBMITTER: Ataullah A 

PROVIDER: S-EPMC9111115 | biostudies-literature | 2022 Feb

REPOSITORIES: biostudies-literature