Which Institutional Investors Matter for Firm Survival and Performance?

51 Pages Posted: 4 Nov 2012 Last revised: 16 Sep 2013

See all articles by Janet Kiholm Smith

Janet Kiholm Smith

Claremont McKenna College - Robert Day School of Economics and Finance

Richard L. Smith

University of California, Riverside - Anderson Graduate School of Management

Grigori Erenburg

University of Western Ontario - King's University College

Date Written: August 8, 2013

Abstract

We assess the diverse roles of institutional investors in impacting survival and performance of chronically underperforming firms and contrast the results for consistently overperforming firms. We find material differences in institutional investor roles between these two samples. Differentiating among institutional types, using common evaluation criteria, and controlling for prior performance and attrition bias provides insights unattainable by examining aggregated holdings or holdings of a single type. For underperformers, results are negative for activist pension funds and long-term institutions, positive for activist hedge funds and short-term institutions, and mixed for institutional blockholders. Differences between independent and gray institutions are not material.

Keywords: institutional investors, corporate governance, underperforming firms, activist pension funds, hedge funds, blockholders, acquisition, bankruptcy, distressed firms

JEL Classification: G3, L2, G20, G33, G34

Suggested Citation

Smith, Janet Kiholm and Smith, Richard L. and Erenburg, Grigori, Which Institutional Investors Matter for Firm Survival and Performance? (August 8, 2013). Available at SSRN: https://ssrn.com/abstract=2171029 or http://dx.doi.org/10.2139/ssrn.2171029

Janet Kiholm Smith (Contact Author)

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-3276 (Phone)

Richard L. Smith

University of California, Riverside - Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
951-827-3554 (Phone)

HOME PAGE: http://www.agsm.ucr.edu/

Grigori Erenburg

University of Western Ontario - King's University College ( email )

266 Epworth Avenue
London, Ontario N6A 2M3
Canada

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