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On institutional ownership and firm performance: A disaggregated view

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  • Bhattacharya, Prasad S.
  • Graham, Michael A.

Abstract

We study the relationship between institutional ownership and firm performance in Finland. A systems approach is employed to investigate the potential two-way causality between firm performance and ownership structure. Three-stage least squares estimation technique is used to solve for the systems. The evidence suggests an endogeneity problem between firm performance and institutional ownership. However, the magnitude of the problem differs with respect to the concentration of ownership measure used. Our results show that a more equal distribution of the voting power among the largest institutional stakeholder may exert positive effects on firm performance. We also find a significant difference relating to firm performances and equity ownerships between the two classes of institutional investor. Consistent with the ownership structure in Finland, we find that a simple ownership concentration index does not influence firm performance.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Multinational Financial Management.

Volume (Year): 19 (2009)
Issue (Month): 5 (December)
Pages: 370-394

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Handle: RePEc:eee:mulfin:v:19:y:2009:i:5:p:370-394

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Web page: http://www.elsevier.com/locate/mulfin

Related research

Keywords: Institutional ownership Firm performance 3SLS System of equations Two-way feedback;

References

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Citations

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Cited by:
  1. Belghitar, Yacine & Clark, Ephraim & Kassimatis, Konstantino, 2011. "The prudential effect of strategic institutional ownership on stock performance," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 191-199, August.
  2. de La Bruslerie, Hubert & Latrous, Imen, 2012. "Ownership structure and debt leverage: Empirical test of a trade-off hypothesis on French firms," Journal of Multinational Financial Management, Elsevier, vol. 22(4), pages 111-130.
  3. Hubert De La Bruslerie & Imen Latrous, 2012. "Ownership Structure and Debt Leverage: Empirical Test of a Trade-Off Hypothesis on French Firms," Post-Print halshs-00674250, HAL.

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