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Are institutional blockholders effective monitors? Evidence from corporate investment efficiency

Author

Listed:
  • Barka Zeineb

    (IHEC - Institut des hautes études commerciales (Carthage, Tunisie) - UCAR - Université de Carthage (Tunisie))

  • Sabri Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School)

  • Taher Hamza

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School)

Abstract

This paper investigates the relationship between institutional blockholdings and corporate investment efficiency. Using a sample of 283 French-listed firms during 2002‒2016, we find that institutional blockholders improve investment efficiency and decrease the magnitude of over-investment. This finding withstands a battery of sensitivity checks and remains unchanged after accounting for endogeneity concerns. Moreover, we provide evidence that investment inefficiency decrease in the presence of institutional investors with longer-term investment horizons due to improved monitoring and information quality. Third, we find that both foreign and domestic institutional blockholders play a significant role in shaping firms' efficient investment behavior. Finally, cross-sectional tests indicate that institutional monitoring mitigates investment distortions to a greater extent for firms facing higher agency problems and greater information asymmetry.

Suggested Citation

  • Barka Zeineb & Sabri Boubaker & Taher Hamza, 2025. "Are institutional blockholders effective monitors? Evidence from corporate investment efficiency," Post-Print hal-04990225, HAL.
    • Handle: RePEc:hal:journl:hal-04990225
    DOI: 10.59876/a-9dhe-6dwx
    as

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