Institutional Monitoring: Evidence from the F‐Score

30 Pages Posted: 22 Oct 2015

See all articles by Chune Young Chung

Chune Young Chung

Chung-Ang University - College of Business & Economics

Chang Liu

Hawaii Pacific University - College of Business Administration

Kainan Wang

University of Toledo

Blerina Bela Zykaj

Clemson University

Multiple version iconThere are 2 versions of this paper

Date Written: September/October 2015

Abstract

The extant literature shows that institutional investors engage in corporate governance to enhance a firm's long‐term value. Measuring firm performance using the F‐Score, we examine the persistent monitoring role of institutional investors and identify the financial aspects of a firm that institutional monitoring improves. We find strong evidence that long‐term institutions with large shareholdings consistently improve a firm's F‐Score and that such activity occurs primarily through the enhancement of the firm's operating efficiency. Other institutions reduce a firm's F‐Score. Moreover, we find evidence that, while monitoring institutions improve a firm's financial health, transient (followed by non‐transient) institutions trade on this information.

Keywords: institutional investor, F‐Score, monitoring, financial strength

Suggested Citation

Chung, Chune Young and Liu, Chang and Wang, Kainan and Zykaj, Blerina Bela, Institutional Monitoring: Evidence from the F‐Score (September/October 2015). Journal of Business Finance & Accounting, Vol. 42, Issue 7-8, pp. 885-914, 2015. Available at SSRN: https://ssrn.com/abstract=2677424 or http://dx.doi.org/10.1111/jbfa.12123

Chune Young Chung (Contact Author)

Chung-Ang University - College of Business & Economics ( email )

84 Heuk-suk Ro
Seoul
Korea, Republic of (South Korea)

Chang Liu

Hawaii Pacific University - College of Business Administration ( email )

900 Fort Street Mall
Suite 600
Honolulu, HI 96813
United States

Kainan Wang

University of Toledo ( email )

Department of Finance
Mail Stop 103
Toledo, OH 43606
United States

Blerina Bela Zykaj

Clemson University ( email )

101 Sikes Ave
Clemson, SC 29634
United States

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