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Do Motivated Institutional Investors Monitor Firm Payout And Performance?

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  • Gregory L. Nagel
  • M. Arif Qayyum
  • Kenneth D. Roskelley

Abstract

type="main" xml:lang="en"> We document a positive relation between shareholder monitoring and total payout to shareholders using two monitoring proxies that jointly consider an investor's ability and incentive to monitor. We find that this relation is even stronger for firms with poor growth options and with greater potential for agency problems. Unlike traditional proxies, our two proxies do not exhibit any endogeneity with payout policy. We further show that monitoring is positively associated with future improvements in payout and operating performance. These findings are consistent with the prediction that shareholder monitoring leads to higher payout through increased efficiency and reduced agency costs.

Suggested Citation

  • Gregory L. Nagel & M. Arif Qayyum & Kenneth D. Roskelley, 2015. "Do Motivated Institutional Investors Monitor Firm Payout And Performance?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 38(3), pages 349-377, September.
    • Handle: RePEc:bla:jfnres:v:38:y:2015:i:3:p:349-377
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    Cited by:

    1. Ravid, S. Abraham & Sekerci, Naciye, 2020. "Large investors’ portfolio composition and firms value," Journal of Corporate Finance, Elsevier, vol. 61(C).
    2. Cheung, Adrian (Wai Kong) & Hasan, Mostafa Monzur & Khoo, Joye, 2021. "Distracted institutional shareholders and corporate cash holdings," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 453-466.
    3. Miller, Steve & Qiu, Bin & Wang, Bin & Yang, Tina, 2022. "Monitoring institutional ownership and corporate innovation," Journal of Empirical Finance, Elsevier, vol. 69(C), pages 144-165.
    4. Aluchna, Maria & Roszkowska-Menkes, Maria & Kamiński, Bogumił & Bosek-Rak, Dominika, 2022. "Do institutional investors encourage firm to social disclosure? The stakeholder salience perspective," Journal of Business Research, Elsevier, vol. 142(C), pages 674-682.
    5. Maria Aluchna & Tomasz Kuszewski, 2021. "Do Financial Investors Mitigate Agency Problems? Evidence from an Emerging Market," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 872-888.
    6. Cline, Brandon N. & Fu, Xudong & Tang, Tian, 2020. "Shareholder investment horizons and bank debt financing," Journal of Banking & Finance, Elsevier, vol. 110(C).
    7. Safiullah, Md & Alam, Md Samsul & Islam, Md Shahidul, 2022. "Do all institutional investors care about corporate carbon emissions?," Energy Economics, Elsevier, vol. 115(C).
    8. Onur Kemal Tosun, 2020. "Differences in CEO compensation under large and small institutional ownership," European Financial Management, European Financial Management Association, vol. 26(4), pages 1031-1058, September.
    9. Constantinos Alexiou & Abdulkadir Mohamed & Joe Nellis, 2021. "The impact of institutional investors on firms' performance in the context of financialization," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 290-309, January.

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