Institutional ownership and investment by private companies

Seth Armitage; Ronan Gallagher; Jiaman Xu

doi:10.1016/j.bar.2025.101585

Institutional ownership and investment by private companies

Seth Armitage^*, Ronan Gallagher, Jiaman Xu

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

We examine the impact of institutional shareholders on the investment activity and external financing of established private companies. Our sample includes both VC and non-VC institutions, and both controlling and minority ownership stakes. Institutions give rise to higher levels of investment in intangible assets—but not in tangible assets—and higher funding via external equity. These results apply even if the institution has a small non-controlling stake, suggesting that institutions promote investment by alleviating funding constraints. Over 40% of our sample firms display ownership by non-VC institutions only, acting independently of VC funds.

Original language	English
Article number	101585
Pages (from-to)	1-24
Number of pages	24
Journal	British Accounting Review
Early online date	30 Jan 2025
DOIs	https://doi.org/10.1016/j.bar.2025.101585
Publication status	E-pub ahead of print - 30 Jan 2025

Keywords / Materials (for Non-textual outputs)

corporate investment
funding constraints
investing institutions
private companies
venture capital

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CorrectedProofArmitageEtalBAR2025InstitutionalOwnershipAndInvestmentFinal published version, 1.07 MBLicence: Creative Commons: Attribution (CC-BY)

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title = "Institutional ownership and investment by private companies",

abstract = "We examine the impact of institutional shareholders on the investment activity and external financing of established private companies. Our sample includes both VC and non-VC institutions, and both controlling and minority ownership stakes. Institutions give rise to higher levels of investment in intangible assets—but not in tangible assets—and higher funding via external equity. These results apply even if the institution has a small non-controlling stake, suggesting that institutions promote investment by alleviating funding constraints. Over 40\% of our sample firms display ownership by non-VC institutions only, acting independently of VC funds.",

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T1 - Institutional ownership and investment by private companies

AU - Armitage, Seth

AU - Gallagher, Ronan

AU - Xu, Jiaman

PY - 2025/1/30

Y1 - 2025/1/30

N2 - We examine the impact of institutional shareholders on the investment activity and external financing of established private companies. Our sample includes both VC and non-VC institutions, and both controlling and minority ownership stakes. Institutions give rise to higher levels of investment in intangible assets—but not in tangible assets—and higher funding via external equity. These results apply even if the institution has a small non-controlling stake, suggesting that institutions promote investment by alleviating funding constraints. Over 40% of our sample firms display ownership by non-VC institutions only, acting independently of VC funds.

AB - We examine the impact of institutional shareholders on the investment activity and external financing of established private companies. Our sample includes both VC and non-VC institutions, and both controlling and minority ownership stakes. Institutions give rise to higher levels of investment in intangible assets—but not in tangible assets—and higher funding via external equity. These results apply even if the institution has a small non-controlling stake, suggesting that institutions promote investment by alleviating funding constraints. Over 40% of our sample firms display ownership by non-VC institutions only, acting independently of VC funds.

KW - corporate investment

KW - funding constraints

KW - investing institutions

KW - private companies

KW - venture capital

UR - https://www.scopus.com/pages/publications/85217433503

UR - https://www.sciencedirect.com/science/article/pii/S0890838925000356?via%3Dihub#appsec1

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DO - 10.1016/j.bar.2025.101585

M3 - Article

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SN - 0890-8389

SP - 1

EP - 24

JO - British Accounting Review

JF - British Accounting Review

M1 - 101585

ER -

Institutional ownership and investment by private companies

Abstract

Keywords / Materials (for Non-textual outputs)

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Institutional ownership and investment by private companies

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