Abstract

http://ssrn.com/abstract=1361143
 
 

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Does Governance Travel around the World? Evidence from Institutional Investors


Reena Aggarwal


Georgetown University - Robert Emmett McDonough School of Business

Isil Erel


Ohio State University (OSU) - Department of Finance

Miguel A. Ferreira


Nova School of Business and Economics; European Corporate Governance Institute (ECGI)

Pedro P. Matos


University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

May 29, 2010

Fisher College of Business Working Paper No. 2009-008
AFA 2010 Atlanta Meetings Paper
Fourth Singapore International Conference on Finance 2010 Paper
ECGI - Finance Working Paper No. 267/2010
CELS 2009 4th Annual Conference on Empirical Legal Studies Paper

Abstract:     
We examine whether institutional investors affect corporate governance by analyzing portfolio holdings of institutions in companies from 23 countries during the period 2003-2008. We find that firm-level governance is positively associated with international institutional investment. Changes in institutional ownership over time positively affect subsequent changes in firm-level governance, but the opposite is not true. Foreign institutions and institutions from countries with strong shareholder protection play a crucial role in promoting governance improvements outside of the U.S. Institutional investors affect not only which corporate governance mechanisms are in place, but also outcomes. Firms with higher institutional ownership are more likely to terminate poorly performing CEOs and exhibit improvements in valuation over time. Our results suggest that international portfolio investment by institutional investors promote good corporate governance practices around the world.

Number of Pages in PDF File: 66

Keywords: Institutional Investors, Corporate Governance, Shareholder Activism

JEL Classification: G32, G34, G38

working papers series


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Date posted: March 24, 2009 ; Last revised: February 24, 2012

Suggested Citation

Aggarwal, Reena and Erel, Isil and Ferreira, Miguel A. and Matos, Pedro P., Does Governance Travel around the World? Evidence from Institutional Investors (May 29, 2010). Fisher College of Business Working Paper No. 2009-008; AFA 2010 Atlanta Meetings Paper; Fourth Singapore International Conference on Finance 2010 Paper; ECGI - Finance Working Paper No. 267/2010; CELS 2009 4th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: http://ssrn.com/abstract=1361143 or http://dx.doi.org/10.2139/ssrn.1361143

Contact Information

Reena Aggarwal (Contact Author)
Georgetown University - Robert Emmett McDonough School of Business ( email )
3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)
HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

Isil Erel
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

Miguel Almeida Ferreira
Nova School of Business and Economics ( email )
Campus de Campolide
Lisbon, 1099-032
Portugal
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Pedro P. Matos
University of Virginia - Darden School of Business ( email )
University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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