Institutional Monitoring: Evidence from the F-Score

Chune Young Chung, Chang Liu, Kainan Wang and Blerina Zykaj

Journal of Business Finance & Accounting, 2015, vol. 42, issue 7-8, 885-914

Abstract: The extant literature shows that institutional investors engage in corporate governance to enhance a firm's long-term value. Measuring firm performance using the F-Score, we examine the persistent monitoring role of institutional investors and identify the financial aspects of a firm that institutional monitoring improves. We find strong evidence that long-term institutions with large shareholdings consistently improve a firm's F-Score and that such activity occurs primarily through the enhancement of the firm's operating efficiency. Other institutions reduce a firm's F-Score. Moreover, we find evidence that, while monitoring institutions improve a firm's financial health, transient (followed by non-transient) institutions trade on this information.

Date: 2015
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Citations: View citations in EconPapers (27)

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