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Further Evidence On Institutional Ownership And Corporate Value

In: Corporate Governance

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  • William W. Jennings

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.

Suggested Citation

  • William W. Jennings, 2005. "Further Evidence On Institutional Ownership And Corporate Value," Advances in Financial Economics, in: Corporate Governance, pages 167-207, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:afeczz:s1569-3732(04)11008-6
    DOI: 10.1016/S1569-3732(04)11008-6
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