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The effect of institutional ownership on firm innovation: Evidence from Chinese listed firms

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  • Rong, Zhao
  • Wu, Xiaokai
  • Boeing, Philipp

Abstract

Monitoring by institutional investors can act as an important mechanism to promote firm innovation. By investigating Chinese listed firms' patenting between 2002 and 2011, we find that the presence of institutional investors enhances firm innovation. Consistent with the monitoring view, we further find that (1) the effect of institutional investors on firm patenting mainly comes from mutual funds; (2) the effect is more pronounced when market competition is more intense; (3) the effect exists among private- and minor state-owned enterprises, but not among major state-owned enterprises. The above findings are robust when innovation quality is examined.

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  • Rong, Zhao & Wu, Xiaokai & Boeing, Philipp, 2017. "The effect of institutional ownership on firm innovation: Evidence from Chinese listed firms," ZEW Discussion Papers 17-005, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:17005
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    Cited by:

    1. Blake Rayfield & Omer Unsal, 2019. "Institutional Monitoring and Litigation Risk: Evidence from Employee Disputes," NFI Working Papers 2019-WP-02, Indiana State University, Scott College of Business, Networks Financial Institute.
    2. repec:eee:respol:v:47:y:2018:i:9:p:1853-1867 is not listed on IDEAS
    3. repec:eee:enepol:v:122:y:2018:i:c:p:241-252 is not listed on IDEAS
    4. repec:eee:appene:v:247:y:2019:i:c:p:682-691 is not listed on IDEAS
    5. repec:gam:jsusta:v:11:y:2019:i:2:p:297-:d:195990 is not listed on IDEAS

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    Keywords

    Institutional investor; Firm innovation; Patenting; Mutual funds; China;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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