We measure the sensitivity of investment to changes in investment opportunities in the shipping industry, and test whether this relation is moderated by ownership concentration. For a sample of 126 globally listed shipping firms, we find that investment in commercial shipping follows freight rates, a measure of the potential income stream from owning a vessel. Ownership concentration, measured as the ownership stake of the largest shareholder, reinforces the positive effect of freight rates on investment, indicating a higher relative efficiency of capital allocation. The positive impact ownership has on the investment-freight rate sensitivity also translates into higher firm value. An analysis of investor identity shows that our results are driven by the group of firms where the largest owner is a financial investor, who is usually more focused on shareholder value maximization.
Dr Ignacio Requejo is Assistant Professor of Finance at Universidad de Salamanca (Spain). He holds a PhD degree in Business Economics with a “European Distinction” from this university. During his doctoral studies, he stayed at Saïd Business School (University of Oxford) as a Visiting Doctoral Student and at the Centre for Corporate Governance at London Business School (University of London) as a Visiting Research Assistant. Ignacio’s thesis on family firms was awarded the 2011 Best Doctoral Dissertation Award sponsored by the Family Firm Institute (FFI) and Relative Solutions. His work has been published in top finance and governance journals, including the Journal of Corporate Finance, Corporate Governance: An International Review and the Journal of Empirical Finance. He has presented several papers in numerous international conferences, including the Financial Management Association (FMA) International Annual Meeting, the European Financial Management Association (EFMA) Annual Conference and the Annual International Family Enterprise Research Academy (IFERA) Conference. He has also presented his work at invited research seminars held at Saïd Business School, London Business School, Leeds University Business School and University of Strathclyde Business School.
Using a large sample of institutionally managed portfolios, we study the role of social trust in the equity allocations of 8,088 investors from 33 countries over the 2000-2017 period. The negative relation between social trust and foreign bias suggests that institutional investors from high-social trust countries are less prone to underinvesting in foreign equity. Our results provide credence to an information-based explanation, indicating that social trust reduces foreign bias by compensating the lack of information about foreign markets. The negative relation between social trust and foreign bias does not hold unconditionally, but only relates to host countries with weak formal institutional frameworks. The informal institution of social trust can offset the lack of formal country-level institutions in international portfolio decisions. Social trust helps investors accomplish greater cross-country portfolio diversification.