Institutional investors and company market value – the case of Poland

Abstract

Institutional investors have contributed to the development of capital markets in transition economies, including Poland’s. Since they leverage detailed fundamental analysis and actively seek the highest possible returns on investments, their decisions are expected to be accurate and are observed carefully, often treated as signals for other investors to follow. As a result, the market valuations of target companies are expected to increase. The objective of this paper is to determine whether the presence of institutional investors in the ownership structure coexists with a higher market valuation of a listed company. The estimation of a panel model with fixed effects (681 companies listed on the Warsaw Stock Exchange, WSE, between 2014 and 2018) indicates that a higher share of institutional investors in the ownership structure coexists with a higher Price to Book Value (PB).