Are Institutional Investors with Multiple Blockholdings Effective Monitors?

63 Pages Posted: 20 Mar 2012 Last revised: 2 Apr 2018

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Juan Luo

University of Adelaide - Business School; Financial Research Network (FIRN)

Hyun Seung Na

Korea University Business School (KUBS)

Date Written: March 2018

Abstract

We examine whether institutions’ monitoring effectiveness is related to the number of their blockholdings. We find that the number of blocks that a firm’s large institutions hold is positively associated with forced chief executive officer (CEO) turnover-performance sensitivity, abnormal returns around forced CEO turnover announcements and 13D filings, and changes in firm value. These results are particularly evident when institutions have multiple blockholdings in the same industry, when they have activism experience, or when they have long-term blockholdings in their portfolio firms. Our results suggest that information advantages and governance experience obtained from multiple blockholdings are important channels through which institutions perform effective monitoring.

Keywords: Corporate governance, Institutional investors, Multiple blockholdings, Monitoring, Experience

JEL Classification: G30, G32, G34

Suggested Citation

Kang , Jun-Koo and Luo, Juan and Na, Hyun Seung, Are Institutional Investors with Multiple Blockholdings Effective Monitors? (March 2018). Journal of Financial Economics (JFE), Forthcoming; AFA 2013 San Diego Meetings Paper; Asian Finance Association (AsianFA) 2017 Conference. Available at SSRN: https://ssrn.com/abstract=2024700 or http://dx.doi.org/10.2139/ssrn.2024700

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Juan Luo

University of Adelaide - Business School ( email )

10 Pulteney Street
Adelaide, South Australia 5005
Australia
+61 8 8313 0133 (Phone)
+61 8 8223 4782 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Hyun Seung Na (Contact Author)

Korea University Business School (KUBS) ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea

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