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Monitoring institutional ownership and corporate innovation

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  • Miller, Steve
  • Qiu, Bin
  • Wang, Bin
  • Yang, Tina

Abstract

We document a positive effect of monitoring institutional ownership on firm innovation after controlling for traditional measures of institutional ownership. We further find that monitoring institutions enhance firm innovation by: (1) incentivizing CEO risk-taking and reducing intense board monitoring, (2) alleviating agency problems, (3) attenuating managerial career concerns, and (4) mitigating corporate misvaluation. Overall, our findings highlight the importance of considering institutions’ monitoring incentives when examining the outcomes of their portfolio firms’ activities associated with high information asymmetry.

Suggested Citation

  • Miller, Steve & Qiu, Bin & Wang, Bin & Yang, Tina, 2022. "Monitoring institutional ownership and corporate innovation," Journal of Empirical Finance, Elsevier, vol. 69(C), pages 144-165.
    • Handle: RePEc:eee:empfin:v:69:y:2022:i:c:p:144-165
    DOI: 10.1016/j.jempfin.2022.09.004
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    More about this item

    Keywords

    Monitoring; Institutional investors; Innovation; Patents; Citations;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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