Abstract
This paper examines the role of institutional investors in improving firm performance through the channel of corporate investment decisions. We find that the interaction effect between institutional ownership and capital expenditures is significantly related to firm performance. We examine this relationship for different types of institutional investors, and find that investment advisors are most effective monitors in improving firm performance through corporate investment. Moreover, we find that the monitoring role of institutional investors becomes more important when internal governance is weak. Institutional ownership and other forms of corporate governance mechanisms (including CEO incentive compensation and control, shareholder right provisions, and board of director monitoring) operate as substitutes, rather than complements, in improving capital expenditure decisions.
| Original language | English |
|---|---|
| Pages (from-to) | 348-365 |
| Number of pages | 18 |
| Journal | Canadian Journal of Administrative Sciences |
| Volume | 29 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 2012 Dec |
Keywords
- Corporate governance
- Corporate investments
- Firm performance
- Institutional ownership
ASJC Scopus subject areas
- Business and International Management
- Public Administration
- Marketing
- Management of Technology and Innovation