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Forthcoming Articles
Volume 27, Numbers 1 & 2 / March/June 2023 , 1-47
Multinational Finance Journal, 2023, vol. 27, no. 1/2, pp. 3-49 | https://doi.org/10.5281/zenodo.14956497
André Küster Simic , Hamburg School of Business Administration HSBA    Corresponding Author
Gabriel Frahm , Helmut Schmidt University
Christian Glöer , HSBA Hamburg School of Business Administration”.

Abstract:
This study investigates the interaction effect between institutional ownership and debt ratio on firm value. Analyzing a large sample consisting of 9,998 observations from 1,351 distinct non-financial firms listed in France, Germany, and the United Kingdom (UK) over the 2002-2018 period, it is documented that the interaction variable exerts a positive effect on firm value. This finding is robust to various firm characteristics, industry and year fixed effects, and it also extends to alternative measures of ownership and firm value. Identification analyses suggest that the effect is causal. This study further finds a stronger impact during times of financial turmoil and that there exists a heterogeneity across different types of institutional ownership. Distinguishing between bank-based and market-based financial systems does not affect the inferences.

Keywords : Crisis; debt; firm value; institutional ownership
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