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The influence of institutional owner monitoring attention on the deterrence of covert opportunism

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  • Wesley, Curtis L.
  • Ndofor, Hermann Achidi

Abstract

The effectiveness of individual institutional owners in deterring managerial opportunism varies with the attention they give each specific portfolio firm (firm–owner dyad). We posit that deterrence of yet-unknown opportunistic behavior is an interplay between dyad characteristics and various contextual factors that increase institutional owner monitoring. Using the early 2000 s stock options backdating scandal as our empirical setting, we theorize that firm performance draws attention, necessitating increased monitoring. As contextual factors, industry-specific monitoring experience, institutional owner portfolio size, firm portfolio weight, and firm investment value further increase monitoring salience, thereby deterring a novel, more covert form of opportunism – options backdating. We find support for our main hypothesis and mixed results for our moderating hypotheses. Poor performance (as indicated by the firm’s Q-ratio) decreases the likelihood of backdating. Increased monitoring experience and smaller portfolios strengthen, while higher firm investment values weaken the firm performance–backdating relationship.

Suggested Citation

  • Wesley, Curtis L. & Ndofor, Hermann Achidi, 2026. "The influence of institutional owner monitoring attention on the deterrence of covert opportunism," Journal of Business Research, Elsevier, vol. 215(C).
    • Handle: RePEc:eee:jbrese:v:215:y:2026:i:c:s0148296326003590
    DOI: 10.1016/j.jbusres.2026.116324
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