Regression Discontinuity Analysis of the Effect of Active Investors on Company's Financial Characteristics

Student: Limin Dmitrii

Supervisor: Oleg Shibanov

Educational Programme: Joint HSE-NES Undergraduate Program in Economics (Bachelor)

Final Grade: 9

Year of Graduation: 2018

I use regression discontinuity approach to disentangle causal relationship between ownership structure and firm’s policy. In my research I employ FTSE 100/250 index discontinuity. Paper presents evidence that increase in active ownership leads to higher return on equity and dividends, effects of institutional ownership on all financial characteristics are insignificant. Effects of active ownership are statistically and economically significant. 10% increase in active ownership leads to 0.8% increase in ROA, 3.1 % increase in ROE and increase in dividends by £ 8,807,000. I found that the effect on ROE persists over time, it is significant in case of 1 and 2 semi-annual period. However, the influence of active ownership on ROE is weaker in the second case.

Full text (added May 29, 2018)

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