Common institutional ownership and the cost of debt in Taiwan

Wei-Zhong Shi, Ming-Chun Hsiao, Tsun-Yi Huang and Min-Teh Yu ()

Pacific-Basin Finance Journal, 2024, vol. 83, issue C

Abstract: We examine the impact of common institutional ownership (CIO) of firms in the same industry on their cost of bank loans using data on Taiwan-listed firms from 1996 to 2021. The evidence shows that CIO is negatively related to loan spreads. When decomposing our sample according to a firm's life cycle and family ownership, the negative relation is significant only in the mature stage of a firm's life cycle and for family-owned firms. The subsample evidence suggests that CIO enhances effective monitoring to increase firm value, lowering loan spreads. We also find that the negative relation becomes statistically insignificant during the financial crisis period because that CIO tends to reduce investments in the same industry, thus weakening its effect during the global financial crisis.

Keywords: Common institutional ownership; Loan spread; Family-owned firms; Agecy cost; Life cycle; Financial crisis (search for similar items in EconPapers)
JEL-codes: G21 G32 G34 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x2300272x

DOI: 10.1016/j.pacfin.2023.102201

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