Institutional Ownership and Returns on Investment

Per-Olof Bjuggren (), Johan Eklund () and Daniel Wiberg

No 208, Ratio Working Papers from The Ratio Institute

Abstract: This paper examines how institutional investors influence investment decisions and returns on investment. To measure investment performance we used a measure of marginal q which measures the ratio of the investment returns to cost of capital. Institutional owners are found to have had a positive effect on performance, with a marginally diminishing effect of institutional ownership concentration. We used longitudinal data on Swedish firms for the period 1999-2005, during which their ownership structure underwent dramatic changes: Institutional investors increased their ownership share, while ownership by Swedish households decreased. However, controlling owners - often founding families - remained in control by resorting to extensive use of dual-class shares, control rights, which separate from cash-flow. This was an important determinant of firm performance, eradicating the positive influence of institutional ownership.

Keywords: Corporate governance; institutions; ownership; performance; Tobin’s q; marginal q (search for similar items in EconPapers)
JEL-codes: C23 G30 L25 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-07-30
New Economics Papers: this item is included in nep-bec
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Related works:
Working Paper: Institutional Ownership and the Returns on Investment (2008)
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