Do Motivated Institutional Investors Monitor Firm Payout and Performance?

39 Pages Posted: 29 May 2016

See all articles by Gregory Leo Nagel

Gregory Leo Nagel

Middle Tennessee State University

Arif Qayyum

Cameron University

Kenneth Roskelley

Mississippi State University - Department of Finance & Economics

Date Written: May 26, 2016

Abstract

We document a positive relation between shareholder monitoring and total payout to shareholders. This relation is stronger for firms with greater potential for agency problems. We also show that monitoring is positively associated with future improvements in payout, operating performance, and corporate governance. These findings are consistent with the prediction that shareholder monitoring leads to higher payout through increased efficiency. We improve on prior studies by jointly considering an investor’s ability and incentive to monitor, and our results suggest that actively monitoring firm payout is a public good.

Keywords: institutional monitoring, payout policy, motivated investor

JEL Classification: G30, G34, G35

Suggested Citation

Nagel, Gregory Leo and Qayyum, Arif and Roskelley, Kenneth, Do Motivated Institutional Investors Monitor Firm Payout and Performance? (May 26, 2016). Journal of Financial Research, Vol. 38, No. 3, 2015. Available at SSRN: https://ssrn.com/abstract=2785019

Gregory Leo Nagel

Middle Tennessee State University ( email )

P.O. Box 50
Murfreesboro, TN 37132
United States

Arif Qayyum

Cameron University ( email )

United States

Kenneth Roskelley (Contact Author)

Mississippi State University - Department of Finance & Economics ( email )

Mississippi State, MS 39762
United States
662-325-1979 (Phone)

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