Ownership Structure, Liquidity, and Firm Value : Effects of the Investment Horizon

A firm's ownership structure influences both its liquidity and value. This paper introduces a new measure of latent investment horizon, a weighted average investment horizon computed from the firm's ownership structure and the average investment horizon of various investor categories. We find that the latent investment horizon explains differences in liquidity and firm value among firms listed on the Tokyo Stock Exchange. Empirical results indicate that the longer the investment horizon, the lower the firm's liquidity and value. In addition, concentrated ownerships by foreign (cross-holding) shareholders can lead to superior (inferior) liquidity and corporate governance after accounting for selection bias