Institutional Monitoring: Evidence from the F‐Score. (17th July 2015)

• Record Type: Journal Article
• Authors: Chung, Chune Young; Liu, Chang; Wang, Kainan; Zykaj, Blerina Bela
• Is Part Of: Journal of business finance & accounting. Volume 42:Number 7/8(2015)
• Page Start: 885
• Page End: 914
• Publication Date: 2015-07-17
• Subjects: Finance -- Periodicals; Accounting -- Periodicals; Business -- Periodicals; 658.15
• DOI: 10.1111/jbfa.12123
• Languages: English
• ISSNs: 0306-686X

Abstract

<abstract abstract-type="main"> <title>Abstract</title> <p>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.</p> </abstract>