Lehman's and Lemons: A Study of Institutional Investment in U.S. Firms

44 Pages Posted: 6 Sep 2012 Last revised: 25 Jan 2013

See all articles by Sandra Dow

Sandra Dow

Monterey Institute of International Studies

Jean McGuire

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Date Written: September 5, 2012

Abstract

We examine the impact of institutional investment on Tobin’s Q for the period 2004 to 2008. We provide further evidence of the heterogeneity of various institutional owners’ willingness to monitor by examining their corporate holdings. We isolate a special role for the four failed banks: Lehman’s, Bear Stearns, Merrill Lynch, and Wachovia. We find that these banks pursued investment strategies that favored risky firms and entrenched management, although this is less certain for Merrill Lynch. We conclude that for the most part these banks pursued short-term profits and that failures in corporate governance were important in fueling the 2008 financial crisis.

Keywords: Financial Crisis, Lehman, governance, institutional investment

JEL Classification: G23, G32, G34

Suggested Citation

Dow, Sandra and McGuire, Jean, Lehman's and Lemons: A Study of Institutional Investment in U.S. Firms (September 5, 2012). Midwest Finance Association 2013 Annual Meeting Paper, Available at SSRN: https://ssrn.com/abstract=2142208 or http://dx.doi.org/10.2139/ssrn.2142208

Sandra Dow (Contact Author)

Monterey Institute of International Studies ( email )

460 Pierce Street
Monterey, CA 93940
United States

Jean McGuire

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration ( email )

Baton Rouge, LA 70803-6308
United States

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