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Corporate value and ownership structure in the post-takeover period: what role do institutional investors play

Author

Listed:
  • Steven L. Jones

    (Kelley School of Business, Indiana University, 801 W. Michigan St., Indianapolis, IN, USA)

  • Darrell Lee

    (Coles College of Business, Kennesaw State University, Kennesaw, GA, USA)

  • James G. Tompkins

    (Coles College of Business, Kennesaw State University, Kennesaw, GA, USA)

Abstract

Several recent papers show that dissident institutions have more influence with management when the level of institutional ownership in the target firm is high. This paper investigates whether increased institutional ownership and institutional ownership concentration reduce agency costs and thus increase corporate value. We find that corporate value is positively related to institutional ownership but negatively related to institutional ownership concentration. This implies that the linkage between corporate value and institutional ownership is driven by momentum trading and supports the view that the bulk of institutional investors remain passive in regards to monitoring. Whether the relaxation of restrictions on institutional communication and ownership (by individual institutions) would facilitate more efficient managerial oversight remains a debatable point. © 1997 John Wiley & Sons, Ltd.

Suggested Citation

  • Steven L. Jones & Darrell Lee & James G. Tompkins, 1997. "Corporate value and ownership structure in the post-takeover period: what role do institutional investors play," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 627-643.
    • Handle: RePEc:wly:mgtdec:v:18:y:1997:i:7-8:p:627-643
    DOI: 10.1002/(SICI)1099-1468(199711/12)18:7/8<627::AID-MDE851>3.0.CO;2-5
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    Cited by:

    1. Sofi Mohd Fikri & Mohamed Hisham Yahya & Taufiq Hassan, 2017. "A Review on Agency Cost of Shariah Governance in Mutual Fund," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 530-538.
    2. Leonardo Becchetti & Fabrizio Adriani, 2004. "Do high-tech stock prices revert to their 'fundamental' value?," Applied Financial Economics, Taylor & Francis Journals, vol. 14(7), pages 461-476.

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