Institutional investors in Australia: Do they play a homogenous monitoring role?

Puspa Muniandy, George Tanewski and Shireenjit K. Johl

Pacific-Basin Finance Journal, 2016, vol. 40, issue PB, 266-288

Abstract: This paper examines whether the presence of institutional investors in Australian publicly listed firms has an impact on firm performance. Our findings provide evidence that institutional investors are not a homogenous group of investors and that it is important to distinguish them by investment objective and their monitoring ability to exert influence. Results show that while institutional investors taken as a homogenous group appear to play an important governance role in terms of future firm performance, our analyses of the three broad typologies of institutional investors and by their respective sub-categories reveal differing conclusions. While pressure-resistant institutional investors (i.e., independent and having only investment relationship) significantly improve the short-term performance of Australian listed firms, they do not show any long-term monitoring ability. The impact of pressure-sensitive institutional investors is less clear, which is consistent with the view that these investors have some existing and potential business ties with the investee firms. More interestingly, we find that “faceless” investors via nominee and trustee institutions play an important monitoring role in creating a long-term firm value. Results have policy implications on the monitoring abilities of institutional investors in Australia.

Keywords: Institutional investors; Ownership structure; Agency problems; Monitoring; Performance (search for similar items in EconPapers)
JEL-codes: D21 G32 M21 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:40:y:2016:i:pb:p:266-288

DOI: 10.1016/j.pacfin.2016.01.001

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