On “Innovation and institutional ownership”

Markus Simeth and David Wehrheim

Journal of Corporate Finance, 2024, vol. 86, issue C

Abstract: In their article “Innovation and Institutional Ownership”, Aghion, Van Reenen and Zingales (2013) find that the rise in institutional stock ownership in the U.S. during the 1990s led to an increase in corporate innovation, as measured by patent and patent citation counts. Their article concludes that “contrary to the view that institutional ownership induces a short-term focus in managers, we find that their presence boosts innovation” (p. 302). Subsequent research has generally accepted this finding at face value. However, we uncover several critical issues with their data. Addressing these issues renders the results economically and statistically insignificant and, in some instances, even suggests a negative relationship between institutional ownership and U.S. innovation.

Keywords: Corporate governance; Innovation; Institutional ownership; Managerial short-termism; Patents (search for similar items in EconPapers)
JEL-codes: G23 G32 L25 M10 O31 O34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:86:y:2024:i:c:s0929119924000312

DOI: 10.1016/j.jcorpfin.2024.102569

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