Institutional Ownership and Firms’ Thrust to Compete

This paper provides evidence on the impact of transient (short-term) institutional in- vestors on a firm’s thrust to compete. A firm’s thrust to compete, as an attribute of cor- porate culture, captures the relative importance of corporate values that push a firm to achieve shareholder value in the short term by emphasizing goal achievement, fast re- sponsetoexternalinformationandenhancedcompetitiveness.Wefindthatgreaterown- ership by transient investors results in firms intensifying their future thrust to compete, suggesting that firms respond to these investors’ preferences and competitive pressures for achieving short-term value creation. In line with our expectations, this effect is not observedforfirmswithgreaterownershipbylong-horizoninstitutionalinvestors,whoare incentivized to place their emphasis on long-term firm value over short-term gains. Our findings reveal that the composition of institutional ownership influences the organiza- tionalcultureof firmsinanon-homogeneousway.Assuch,weprovidesignificantempiri- calinsightsfortheongoingdebateontheimplicationsarisingfromthebehind-the-scenes engagement of institutionalinvestors withmanagement.