Do Motivated Institutional Investors Monitor Firm Payout and Performance?
39 Pages Posted: 29 May 2016
Date Written: May 26, 2016
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: Suggested Citation