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Corporate Governance and Institutional Ownership

Published online by Cambridge University Press:  05 November 2010

Kee H. Chung  and
Hao Zhang
Kee H. Chung
Affiliation:
School of Management, State University of New York at Buffalo, 360 Jacobs Management Center, Buffalo, NY 14260. [email protected]
Hao Zhang
Affiliation:
Saunders College of Business, Rochester Institute of Technology, 105 Lomb Memorial Dr., Rochester, NY 14623. [email protected]
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Abstract

In this study we examine the relation between corporate governance and institutional ownership. Our empirical results show that the fraction of a company’s shares that are held by institutional investors increases with the quality of its governance structure. In a similar vein, we show that the proportion of institutions that hold a firm’s shares increases with its governance quality. Our results are robust to different estimation methods and alternative model specifications. These results are consistent with the conjecture that institutional investors gravitate to stocks of companies with good governance structure to meet fiduciary responsibility as well as to minimize monitoring and exit costs.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 1 , February 2011 , pp. 247 - 273
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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