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Do Institutional Investors Improve Corporate Governance Quality? Evidence From the Blockholdings of the Korean National Pension Service

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  • Chune Young Chung
  • Dongnyoung Kim
  • Junyoup Lee

Abstract

Institutional investors dissatisfied with weak firm governance can directly or indirectly intervene in management to maximise profits. However, no study has investigated the effects of such interventions on corporate governance. This study therefore examines the effect of Korean National Pension Service blockholdings on firms’ corporate governance quality in the Korean market. This setting is interesting because the market is dominated by chaebols, which have ineffective internal governance mechanisms. We find that blockholdings reduce corporate governance quality under various endogeneity checks and empirical models; this finding in an emerging market implies that regulatory authorities should support institutional blockholders’ active market participation.

Suggested Citation

  • Chune Young Chung & Dongnyoung Kim & Junyoup Lee, 2020. "Do Institutional Investors Improve Corporate Governance Quality? Evidence From the Blockholdings of the Korean National Pension Service," Global Economic Review, Taylor & Francis Journals, vol. 49(4), pages 422-437, October.
    • Handle: RePEc:taf:glecrv:v:49:y:2020:i:4:p:422-437
    DOI: 10.1080/1226508X.2020.1798268
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    Cited by:

    1. Bingwen Wang & Chen Wang, 2023. "Green Finance and Technological Innovation in Heavily Polluting Enterprises: Evidence from China," IJERPH, MDPI, vol. 20(4), pages 1-16, February.

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