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We find that greater institutional ownership is associated with more innovation. To explore the mechanism, we contrast the "lazy manager" hypothesis with a model where institutional owners increase innovation incentives through reducing career risks. The evidence favors career concerns. First, we find complementarity between institutional ownership and product market competition, whereas the lazy manager hypothesis predicts substitution. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes, and disaggregating by type of institutional owner, we argue that the effect of institutions on innovation is causal. (JEL G23, G32, L25, M10, O31, O34)

AbstractThis paper describes different forms of ownership across countries and how these forms influence the way companies are governed. In most stock markets in the world, listed companies frequently have a controlling shareholder, usually a family. However, Japan, the UK, and to a lesser extent the US, are exceptions. In these three countries, ownership is frequently highly fragmented, where share stakes are held by different institutional owners, including asset managers, both active and passive, and by shareholder activists. The paper focuses in particular on the governance structure of different institutional shareholders, how they engage with target firms, and their effectiveness. The paper concludes with recommendations for regulators to enhance different forms of ownership.

One of the market anomalies that often occurs in the capital market is the January Effect. This phenomenon occurs when stock returns in January become higher or increase compared to other months. Thus, this study aimed to analyze the January Effect and test the effect of institutional ownership of the anomaly January Effect. This study also uses market returns, stock turnover, and firm's size as control variables. The sample in this study were 73 companies that are categorized as LQ-45 inIndonesia Stock Exchange(ISE) period of 2012 to 2014 in accordance with predetermined criteria. This research method is purposive sampling with analysis techniques using t-test and Moderated Regression Analysis (MRA) which uses (α = 5%). The results of this study proves that the January Effect andinstitutional ownership has significant negative effect on January Effect. In addition, the results showed that market return, stock turnover, and firm's size has a significant positive effect on return.

Influence of institutional ownership has been hypothesised to efficiently monitor the managerial decisions especially discretionary role of managers in reporting earnings. The managers have been found to misrepresent the quality of earnings for a dividend declaration; new issue; takeovers and for affirming debt holders of their financial position. Panel data methodology focusing on firms listed in CNX 500 in National Stock Exchange empirically examines the impact of institutional ownership on the earnings management practices in India. Earnings management is measured using discretionary accounting accruals. Firms with higher institutional holdings are found to have higher earnings quality thus restricting managers from using their discretionary powers to report earnings. Institutional ownership has a negative relationship with earnings management for larger and matured firms. Growing firms are found to be having higher earnings management. Institutional investors monitor the firms and hence reduce aggressive earnings management practices within the firm. Foreign institutional ownership also has a negative relationship with earnings management.

AbstractThis paper examines the role of institutional investors in improving firm performance through the channel of corporate investment decisions. We find that the interaction effect between institutional ownership and capital expenditures is significantly related to firm performance. We examine this relationship for different types of institutional investors, and find that investment advisors are most effective monitors in improving firm performance through corporate investment. Moreover, we find that the monitoring role of institutional investors becomes more important when internal governance is weak. Institutional ownership and other forms of corporate governance mechanisms (including CEO incentive compensation and control, shareholder right provisions, and board of director monitoring) operate as substitutes, rather than complements, in improving capital expenditure decisions. Copyright © 2012 ASAC. Published by John Wiley & Sons, Ltd.

Purpose
This study aims to examine institutional ownership of companies that go public with dual-class share structures.


Design/methodology/approach
Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures.


Findings
Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions.


Originality/value
This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.

This paper examines the impact of outside block-holders on earnings management, using discretionary accounting accruals as the measure of earnings management. For the income-decreasing earnings management scenario, we do not find significant results. This may be attributable to the different natures and time horizons of outside block-holders. Since the majority of outside block-holders are institutional investors, we then investigate the relationship between ownership by institutional investors with different natures and earnings management. Specifically, we find a significant positive relationship between ownership by transient institutional investors (holding diversified portfolios with high turnover) and discretionary accounting accruals. However, we do not find a significant relationship between ownership by dedicated institutional investors (holding concentrated portfolios with low turnover) and discretionary accounting accruals. Therefore, due to the differing natures of institutional investors, we may not treat them as a homogeneous group.