Publication Type
Journal Article
Publication Date
11-2007
Abstract
Within a cost–benefit framework, we hypothesize that independent institutions with long-term investments will specialize in monitoring and influencing efforts rather than trading. Other institutions will not monitor. Using acquisition decisions to reveal monitoring, we show that only concentrated holdings by independent long-term institutions are related to post-merger performance. Further, the presence of these institutions makes withdrawal of bad bids more likely. These institutions make long-term portfolio adjustments rather than trading for short-term gain and only sell in advance of very bad outcomes. Examining total institutional holdings or even concentrated holdings by other types of institutions masks important variation in the subset of monitoring institutions.
Keywords
Corporate governance, Institutional investors, Mergers and acquisitions, Monitoring, Trading
Discipline
Accounting | Corporate Finance
Research Areas
Financial Performance Analysis
Publication
Journal of Financial Economics
Volume
86
Issue
2
First Page
279
Last Page
305
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2006.09.005
Publisher
Elsevier
Citation
CHEN, Xia; Harford, Jarrad; and LI, Kai.
Monitoring: Which institutions matter?. (2007). Journal of Financial Economics. 86, (2), 279-305.
Available at: https://ink.library.smu.edu.sg/soa_research/820
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.1016/j.jfineco.2006.09.005