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Do Financial Investors Mitigate Agency Problems? Evidence from an Emerging Market

Author

Listed:
  • Maria Aluchna
  • Tomasz Kuszewski

Abstract

Purpose: The paper aims to identify the monitoring effect by financial investors and their potential role to mitigate agency costs resulting from concentrated and dispersed ownership. Design/Methodology/Approach: Using the sample of 440 companies from the Warsaw Stock Exchange listed in 2010-2014, we examine whether financial investors may mitigate the agency problems of dispersed and concentrated ownership. Findings: We observe that ownership by financial investors is positively correlated with company value. Adding to the debate on the monitoring role of financial investors, we note that investments by control-oriented institutions and portfolio-oriented investors are correlated with higher Tobin’s Q. Practical implications: The results indicate the positive effect of the monitoring by financial investors, which can offset some limitations of insufficient investor protection in emerging markets. Originality: The study is based on a unique sample of companies listed on the Warsaw Stock Exchange, distinguishing between control-oriented and portfolio-oriented financial investors.

Suggested Citation

  • 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 - Part ), pages 872-888.
    • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:2-part1:p:872-888
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    More about this item

    Keywords

    Concentrated ownership; free float; financial investors.;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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