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Financial strength information and institutional investor demand: Evidence from India

Author

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  • V. Gopikumar
  • Smitha Nair
  • S Sreevathsava
  • Raja Sreedharan V
Abstract
In this paper, we examine whether foreign institutional investors (FII) and mutual funds (MF) show a higher preference for fundamentally stronger firms. We employ Pitroski’s F score and its constituents (profitability, efficiency, and leverage) to measure the fundamental strength of firms. Further, we examine the preferences of FIIs and MFs by conditioning on size and book-to-market ratio. Overall, the results indicate that both types of institutional investors prefer firms with higher expected profitability and are willing to take higher risks. FIIs show a higher preference for riskier firms and MFs prefer firms with higher profitability.

Suggested Citation

  • V. Gopikumar & Smitha Nair & S Sreevathsava & Raja Sreedharan V, 2019. "Financial strength information and institutional investor demand: Evidence from India," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1623751-162, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1623751
    DOI: 10.1080/23322039.2019.1623751
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    Cited by:

    1. Tarunika Jain Agrawal & Sanjay Sehgal & Vibhuti Vasishth, 2020. "Firm Attributes, Corporate Fundamentals and Investment Strategies: An Empirical Study for Indian Stock Market," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 45(3), pages 366-387, August.
    2. Tarunika Jain Agrawal & Sanjay Sehgal & Rahul Agrawal, 2020. "Disruptive Innovations, Fundamental Strength and Stock Winners: Implications for Stock Index Revisions," Vision, , vol. 24(3), pages 356-370, September.

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