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http://ssrn.com/abstract=1509172
 
 

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Local Investors and Corporate Governance


Vidhi Chhaochharia


University of Miami

Alexandra Niessen-Ruenzi


University of Mannheim - Department of Finance

Alok Kumar


University of Miami - School of Business Administration

March 26, 2012

Journal of Accounting & Economics (JAE), Forthcoming

Abstract:     
This paper shows that local institutional investors are effective monitors of corporate behavior. Firms with high local ownership have better internal governance and are more profitable. These firms are also less likely to manage their earnings aggressively or backdate options and are less likely to be targets of class action lawsuits. Further, managers of such firms exhibit a lower propensity to engage in "empire building" and are less likely to "lead the quiet life". Examining the local monitoring mechanisms, we find that local institutions are more likely to introduce shareholder proposals, increase CEO turnover, and reduce excess CEO pay.

Number of Pages in PDF File: 49

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Date posted: November 21, 2009 ; Last revised: April 20, 2012

Suggested Citation

Chhaochharia, Vidhi and Niessen-Ruenzi, Alexandra and Kumar, Alok, Local Investors and Corporate Governance (March 26, 2012). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1509172 or http://dx.doi.org/10.2139/ssrn.1509172

Contact Information

Vidhi Chhaochharia
University of Miami ( email )
514 Jenkins Building
Miami, FL 33124
United States
Alexandra Niessen-Ruenzi
University of Mannheim - Department of Finance ( email )
Mannheim, 68131
Germany
Alok Kumar (Contact Author)
University of Miami - School of Business Administration ( email )
514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)
HOME PAGE: http://moya.bus.miami.edu/~akumar
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