Monitoring by Transient Investors? Institutions and Corporate Control

46 Pages Posted: 27 Oct 2000

See all articles by Lee Pinkowitz

Lee Pinkowitz

Georgetown University - Department of Finance

Date Written: October 18, 2000

Abstract

Do institutions monitor management? This paper argues that even if institutions do not actively monitor, monitoring results via the takeover market. Using 139 hostile attempts from 1985-1994, I show that higher levels of institutional ownership, primarily by mutual funds, increases bid probability. The level rather than the concentration of institutional ownership is the important factor. Also, successful acquisitions are more likely when institutions sell their shares. Further, institutions are not predicting likely targets; in fact, they are net sellers prior to the announcement. Even if institutions do not take an active role in corporate governance, institutional ownership results in increased monitoring, albeit through the market for corporate control.

Keywords: Institutional Ownership, Market for Corporate Control, Hostile Takeovers

JEL Classification: G34, G32,G39

Suggested Citation

Pinkowitz, Lee Foster, Monitoring by Transient Investors? Institutions and Corporate Control (October 18, 2000). Available at SSRN: https://ssrn.com/abstract=247004 or http://dx.doi.org/10.2139/ssrn.247004

Lee Foster Pinkowitz (Contact Author)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2689 (Phone)
202-687-4031 (Fax)

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