Institutional Ownership in Financial Services: Performance and Risk

24 Pages Posted: 22 May 2018

See all articles by James Barrese

James Barrese

St. John's University - School of Risk Management, Insurance and Actuarial Science

David Pooser

St. John’s University

Ping Wang

St. John's University - School of Risk Management, Insurance and Actuarial Science

Date Written: April 7, 2018

Abstract

Institutional investor ownership has often been considered a corporate governance variable, typically used to proxy those investors’ ability to influence managers and to expropriate wealth from smaller shareholders. Large institutional investors have developed common holdings across numerous firms within industries. We consider the effects of institutional investor ownership with risk on the performance of banks and insurance companies. Using a generalized autoregressive conditional heteroscedasticity model with firm- and year-fixed effects, we find strong statistical relation between performance and individual firm’s ownership stakes by Blackrock and Fidelity. Moreover, we find a positive and statistically significant relation between performance and the percentage of the industry’s equity owned by the four organizations together. The findings suggest that some organizations like Blackrock are successful in obtaining long-term returns by exerting influence over the management of their invested firms, which is consistent with recent statements by the Blackrock CEO.

Keywords: institutional investors, performance, risk

Suggested Citation

Barrese, James and Pooser, David and Wang, Ping, Institutional Ownership in Financial Services: Performance and Risk (April 7, 2018). Available at SSRN: https://ssrn.com/abstract=3174755 or http://dx.doi.org/10.2139/ssrn.3174755

James Barrese

St. John's University - School of Risk Management, Insurance and Actuarial Science ( email )

United States

David Pooser

St. John’s University ( email )

Department of Economics and Finance
Tobin College of Business
Queens, NY 11439

Ping Wang (Contact Author)

St. John's University - School of Risk Management, Insurance and Actuarial Science ( email )

United States

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