Further Evidence on Institutional Ownership and Corporate Value

40 Pages Posted: 10 Jun 2004

See all articles by William W. Jennings

William W. Jennings

U.S. Air Force Academy - Department of Management

Date Written: May 30, 2004

Abstract

Whether institutional investors monitor corporations and improve firm value is a key question for corporate governance and investment management. I find little empirical support for the hypothesis that institutions undertake monitoring that increases firm quality and valuation. Granger causation tests show that while quality firms do attract institutional investment, institutions do not monitor and firm value subsequently declines. Instead, institutional incentives are critical; some institutions with strong incentives to monitor do, indeed, monitor. Institutions with concentrated portfolios successfully monitor while institutions with a larger percentage stake do not. Pensions and endowments are better monitors than insurers, banks and mutual funds.

Keywords: Corporate governance, institutional ownership

JEL Classification: G32, G34, G2

Suggested Citation

Jennings, William W., Further Evidence on Institutional Ownership and Corporate Value (May 30, 2004). Available at SSRN: https://ssrn.com/abstract=555886 or http://dx.doi.org/10.2139/ssrn.555886

William W. Jennings (Contact Author)

U.S. Air Force Academy - Department of Management ( email )

2354 Fairchild Drive
Suite 6H-94
Academy, CO 80840-2944
United States

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