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Investigating Investment Preferences of Institutional Investors toward ISE Companies

Serkan Yilmaz Kandir

Istanbul Stock Exchange Review, 2010, vol. 11, issue 44, 29-58

Abstract: Institutional investors may be defined as specialized financial institutions that manage savings collectively on behalf of small investors toward specific objectives. Aim of this study is to investigate the factors that affect investment preferences of institutional investors toward ISE companies. Empirical analysis is performed by employing cross-sectional regression model. In the regression model, estimated for the years, 2005, 2006 and 2007, institutional ownership in each company is used as dependent variable, while firm characteristics are used as independent variables. Firm characteristics are, cumulative one-year stock return, standard deviation of stock returns, market value, leverage ratio, firm age, turnover ratio, return-on-assets, dividend payment dummy and ISE-100 index dummy. Analysis results suggest that institutional investors invest prudently in ISE companies. Institutional investors seem to prefer companies with big scale, low level of total risk and stock liquidity, high level of return-on-assets and companies included in ISE- 100 index. Institutional investors’ preference toward dividend paying and old companies appear to be less evident. On the other hand, institutional investors do not seem to have an explicit investment pattern related with companies’ recent stock returns and capital structures.

Keywords: Institutional Investors; ISE; Firm Characteristics; Prudent Investment Hypothesis. (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2010
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