Date of Degree


Document Type


Degree Name





Armen Hovakimian

Committee Members

Jun Wang

Yao Shen

Karl Lang

Subject Categories

Corporate Finance


Retained earnings, Institutional preferences, Market timing, Seasoned equity offerings, Leverage, Pecking Order


This dissertation consists of three chapters about how institutional ownership and trading affect capital structure.

Chapter 1

The literature documents that firms issue equity following periods of high stock return and such behavior only occurs in concert with high returns that coincide with large amounts of buying by new institutions. My findings suggest this is also associated with strong institutional selling, the opposite of what one would expect. This positive relationship is not driven by outflow-motivated selling, but rather by informed selling by short-term institutions.

Chapter 2

I document a strong negative relationship between institutional ownership and leverage. I find evidence that long-term institutions affect firm financing following the pecking order. They influence firms to use more internal financing, and more debt than equity when external financing is needed. While the preference of debt over equity when using external financing would lead to higher leverage, using more internal financing dominates this positive effect, resulting in lower leverage.

Chapter 3

I examine whether institutional investors have preferences for firms' leverage ratios, and if so, whether the said preference affect firms' financing decisions. I find supporting evidence for the first question but opposing evidence for the second question. The conclusions hold in both firm-level and institution-firm-level analysis.