Investment vs business views of institutional investors, investment efficiency and firm life cycle theory

Abstract

This study connects the investment view and business view of institutional investors with the theory of firm life cycle to explain the impact of pressure-resistant and pressure-sensitive institutional investors on firms’ investment efficiency. Using a sample of publicly listed firms in Malaysia, we find that pressure-resistant institutional investors in all firm life cycle stages are driven by the investment view that improves investment efficiency. However, for pressure-sensitive institutional investors, we find that these investors are driven by investment views on investment efficiency at the growth stage and business views at the introduction, mature, and decline stages (Abuhommous, 2024). These results imply that the participation objectives of institutional investors are different based on the business relations with the firm and the firm’s development stages (Ghazali et al., 2022). Overall, these findings conclude that the relationship type and goals of investors matter.