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On “Innovation and institutional ownership”

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  • Simeth, Markus
  • Wehrheim, David

Abstract

In their article “Innovation and Institutional Ownership”, Aghion, Van Reenen and Zingales (2013) find that the rise in institutional stock ownership in the U.S. during the 1990s led to an increase in corporate innovation, as measured by patent and patent citation counts. Their article concludes that “contrary to the view that institutional ownership induces a short-term focus in managers, we find that their presence boosts innovation” (p. 302). Subsequent research has generally accepted this finding at face value. However, we uncover several critical issues with their data. Addressing these issues renders the results economically and statistically insignificant and, in some instances, even suggests a negative relationship between institutional ownership and U.S. innovation.

Suggested Citation

  • Simeth, Markus & Wehrheim, David, 2024. "On “Innovation and institutional ownership”," Journal of Corporate Finance, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:corfin:v:86:y:2024:i:c:s0929119924000312
    DOI: 10.1016/j.jcorpfin.2024.102569
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    More about this item

    Keywords

    Corporate governance; Innovation; Institutional ownership; Managerial short-termism; Patents;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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