Institutional ownership and firm performance: evidence from Finland

Bhattacharya, Prasad and Graham, Michael 2007, Institutional ownership and firm performance: evidence from Finland, in 2007 Australasian Meeting of the Econometric Society, University of Queensland, Brisbane, Qld., pp. 1-33.

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Title Institutional ownership and firm performance: evidence from Finland
Author(s) Bhattacharya, PrasadORCID iD for Bhattacharya, Prasad
Graham, Michael
Conference name Australasian Meeting of the Econometric Society (2007: Brisbane, Qld.)
Conference location Brisbane, Qld.
Conference dates 3-6 July 2007
Title of proceedings 2007 Australasian Meeting of the Econometric Society
Editor(s) O'Donnell,Chris
Rambaldi, Alicia
Publication date 2007
Conference series Australasian Meeting of the Econometric Society
Start page 1
End page 33
Publisher University of Queensland
Place of publication Brisbane, Qld.
Keyword(s) institutional ownership
firm performance
joint determination
three stage least squares technique
system of equations
two-way feedback
Summary This paper investigates the relationship between different classes of institutional investors and firm performance. Using industry level data from Finland, which is characterized by various institutional investors who own multiple ownership stakes in different firms across a broad spectrum of industries, the paper exhibits two novelties. First, unlike previous studies which treated institutional investors as a monolithic group, we segment them in classes. Second, we recognize the joint determination of firm performance and institutional ownership. We account for this issue in the context of a system of equations, using three stage least squares methodology. The empirical results suggest a significant two-way feedback between firm performance and institutional equity ownership. However, this effect is not symmetric. We find that institutional investors with likely investment and business ties with firms have adverse (negative) effect on firm performance and the impact is very significant in comparison to the negative effect of firm performance on institutional ownership.
Language eng
Field of Research 140207 Financial Economics
Socio Economic Objective 970114 Expanding Knowledge in Economics
HERDC Research category E1 Full written paper - refereed
Copyright notice ©2007, University of Queensland
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Document type: Conference Paper
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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