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Do institutional shareholders police management?

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  • Paul Clyde

    (National Economic Research Associates, Washington, DC, USA)

Abstract

Some have argued that legislation limits the ability of institutional shareholders to discipline shirking management teams. However the level of takeover activity in the 1980s suggests that the cost of using takeovers to discipline management has decreased. This may give institutional shareholders the ability to participate actively in corporate governance. This paper presents an empirical examination that is consistent with this hypothesis. First, institutional ownership concentration varies across firms according to the benefits of policing firms in 1988. The relationship is less pronounced in 1980. Second, firms characterized by concentrated institutional ownership are more likely to use takeovers as the disciplinary mechanism. © 1997 John Wiley & Sons, Ltd.

Suggested Citation

  • Paul Clyde, 1997. "Do institutional shareholders police management?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-10.
    • Handle: RePEc:wly:mgtdec:v:18:y:1997:i:1:p:1-10
    DOI: 10.1002/(SICI)1099-1468(199702)18:1<1::AID-MDE796>3.0.CO;2-0
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    Cited by:

    1. Akhigbe, Aigbe & Martin, Anna D. & Whyte, Ann Marie, 2007. "Partial acquisitions, the acquisition probability hypothesis, and the abnormal returns to partial targets," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3080-3101, October.
    2. Andriosopoulos, Dimitris & Yang, Shuai, 2015. "The impact of institutional investors on mergers and acquisitions in the United Kingdom," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 547-561.
    3. Mishra, Chandra S., 2022. "Does institutional ownership discourage investment in corporate R&D?," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    4. Song Zhu & Haijie Huang & William Bradford, 2022. "The governance role of institutional investors in management compensation: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1015-1063, April.
    5. Harris, Oneil & Madura, Jeff, 2010. "Cause and effects of poison pill adoptions by spinoff units," Journal of Economics and Business, Elsevier, vol. 62(4), pages 307-330, July.
    6. Davis, E. Philip, 2002. "Institutional investors, corporate governance and the performance of the corporate sector," Economic Systems, Elsevier, vol. 26(3), pages 203-229, September.

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