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Institutional Monitoring: Evidence from the F-Score

Author

Listed:
  • Chune Young Chung
  • Chang Liu
  • Kainan Wang
  • Blerina Bela Zykaj

Abstract

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.

Suggested Citation

  • Chune Young Chung & Chang Liu & Kainan Wang & Blerina Bela Zykaj, 2015. "Institutional Monitoring: Evidence from the F-Score," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(7-8), pages 885-914, September.
    • Handle: RePEc:bla:jbfnac:v:42:y:2015:i:7-8:p:885-914
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    References listed on IDEAS

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