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Institutional investors in Australia: Do they play a homogenous monitoring role?
journal contributionposted on 2016-12-01, 00:00 authored by Puspa MuniandyPuspa Muniandy, George TanewskiGeorge Tanewski, Shireenjit Johl
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.
JournalPacific Basin Finance Journal
Pagination266 - 288
Publication classificationC Journal article; C1 Refereed article in a scholarly journal
Copyright notice2016, Elsevier
Read the peer-reviewed publication
Social SciencesBusiness, FinanceBusiness & EconomicsInstitutional investorsOwnership structureAgency problemsMonitoringPerformanceRESEARCH-AND-DEVELOPMENTPENSION FUND ACTIVISMCORPORATE GOVERNANCEFIRM PERFORMANCEMANAGERIAL OWNERSHIPBOARD COMPOSITIONMARKET VALUATIONFAMILY OWNERSHIPPANEL-DATACOMPENSATION