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http://ssrn.com/abstract=1120204
 
 

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Do UK Institutional Shareholders Monitor Their Investee Firms?


Marc Goergen


Cardiff University - Cardiff Business School; European Corporate Governance Institute (ECGI)

Luc Renneboog


Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Chendi Zhang


University of Warwick - Finance Group

April 2008

TILEC Discussion Paper No. 2008-016
CentER Discussion Paper Series No. 2008-38
ECGI - Finance Working Paper No. 208/2008

Abstract:     
As institutional investors are the largest shareholders in most listed UK firms, one expects them to monitor the firms they invest in. However, there is mounting empirical evidence which suggests that they do not perform any monitoring. This paper provides a new test on whether UK institutional investors engage in monitoring. The test consists of an event study on directors' trades. If institutional shareholders act as monitors, their monitoring activities convey new information about a firm's future value to other outside shareholders and reduce the informational asymmetry between the managers and the market. As a result, directors' trades convey less information to the market, and the stock price reaction is weaker. However, our results show that institutional shareholders do not have any significant impact on the stock price reaction which stands in marked contrast with the impact that families, individuals and other firms have on stock prices.

Number of Pages in PDF File: 28

Keywords: Insider trading, institutional investor monitoring, shareholder activism, corporate

JEL Classification: G14, G39

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Date posted: April 15, 2008 ; Last revised: March 18, 2014

Suggested Citation

Goergen, Marc and Renneboog, Luc and Zhang, Chendi, Do UK Institutional Shareholders Monitor Their Investee Firms? (April 2008). ; CentER Discussion Paper Series No. 2008-38; ECGI - Finance Working Paper No. 208/2008. Available at SSRN: http://ssrn.com/abstract=1120204 or http://dx.doi.org/10.2139/ssrn.1120204

Contact Information

Marc Goergen (Contact Author)
Cardiff University - Cardiff Business School ( email )
Colum Drive
Cardiff, CF10 3EU
United Kingdom
HOME PAGE: http://www.cf.ac.uk/carbs/faculty/goergenm/index.html
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Luc Renneboog
Tilburg University - Department of Finance ( email )
P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Tilburg Law and Economics Center (TILEC)
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Chendi Zhang
University of Warwick - Finance Group ( email )
Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain
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