Stewardship Code, Institutional Investors, and Firm Value: International Evidence

38 Pages Posted: 11 Oct 2019 Last revised: 14 Jan 2022

See all articles by Yutaro Shiraishi

Yutaro Shiraishi

Tokyo Institute of Technology

Naoshi Ikeda

Nihon University

Yasuhiro Arikawa

Waseda University - Graduate School of Business and Finance

Kotaro Inoue

School fo Engineering, Tokyo Institute of Technology

Date Written: January 14, 2022

Abstract

This study investigates whether the introduction of stewardship codes mitigates the free-rider problem of institutional investors and increases the value of firms with high institutional ownership from a cross-county analysis. Using a difference-in-differences approach, we find robust evidence that the introduction of the code in a country increases the value of firms with high institutional ownership. Our findings support the view that stewardship codes encourage institutional investors, who typically hold a widely diversified portfolio, to monitor their portfolio firms. Although previous studies are skeptical about the role of institutional investors whose portfolios are extensively diversified given the free-rider problem, our results indicate that stewardship codes successfully mitigate the problem to a significant extent. Stewardship codes can be an effective mechanism for institutional investors to commit to the monitoring role.

Keywords: Corporate Governance, Institutional Investor, Stewardship Code

JEL Classification: G18, G23, G32, G34, G35

Suggested Citation

Shiraishi, Yutaro and Ikeda, Naoshi and Arikawa, Yasuhiro and Inoue, Kotaro, Stewardship Code, Institutional Investors, and Firm Value: International Evidence (January 14, 2022). Available at SSRN: https://ssrn.com/abstract=3462453 or http://dx.doi.org/10.2139/ssrn.3462453

Yutaro Shiraishi

Tokyo Institute of Technology ( email )

2-12-1 O-okayama, Meguro-ku
Tokyo 152-8550, 52-8552
Japan

Naoshi Ikeda

Nihon University ( email )

2-3-1 Misaki-chou, Chiyoda-ku
Tokyo, 101-8375
Japan

Yasuhiro Arikawa

Waseda University - Graduate School of Business and Finance ( email )

Bldg.26, 1-6-1,
Nishiwaseda
Shinjuku-ku, Tokyo, 1698050
Japan

Kotaro Inoue (Contact Author)

School fo Engineering, Tokyo Institute of Technology ( email )

2-12-1 Ookayama, Muguro-ku
Tokyo, 152-8552
Japan

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