Are institutional blockholders effective monitors? Evidence from corporate investment efficiency

Barka Zeineb, Sabri Boubaker () and Taher Hamza ()
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Barka Zeineb: IHEC - Institut des hautes études commerciales (Carthage, Tunisie) - UCAR - Université de Carthage (Tunisie)
Sabri Boubaker: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Taher Hamza: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

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Abstract: This paper investigates the relationship between institutional blockholdings and corporate investment efficiency. Using a sample of 283 French-listed firms during 2002‒2016, we find that institutional blockholders improve investment efficiency and decrease the magnitude of over-investment. This finding withstands a battery of sensitivity checks and remains unchanged after accounting for endogeneity concerns. Moreover, we provide evidence that investment inefficiency decrease in the presence of institutional investors with longer-term investment horizons due to improved monitoring and information quality. Third, we find that both foreign and domestic institutional blockholders play a significant role in shaping firms' efficient investment behavior. Finally, cross-sectional tests indicate that institutional monitoring mitigates investment distortions to a greater extent for firms facing higher agency problems and greater information asymmetry.

Keywords: Institutional blockholders; Investment efficiency; Information asymmetry; Agency problems; Investor horizons; Efficacité des investissements; Asymétrie d'information; Problèmes d'agence; Horizon des investisseurs (search for similar items in EconPapers)
Date: 2025
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Published in Management international = International management = Gestión internacional, inPress, pp.1-30. ⟨10.59876/a-9dhe-6dwx⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04990225

DOI: 10.59876/a-9dhe-6dwx

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