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Institutional Ownership and Returns on Investment

Author

Listed:
  • Bjuggren, Per-Olof

    (Ratio & JIBBS)

  • Eklund, Johan

    (Swedish Entreprenurship Forum,)

  • Wiberg, Daniel

    (Swedish Ministry of Finance.)

Abstract

This paper examines how institutional investors influence investment decisions and returns on investment. To measure investment performance we used a measure of marginal q which measures the ratio of the investment returns to cost of capital. Institutional owners are found to have had a positive effect on performance, with a marginally diminishing effect of institutional ownership concentration. We used longitudinal data on Swedish firms for the period 1999-2005, during which their ownership structure underwent dramatic changes: Institutional investors increased their ownership share, while ownership by Swedish households decreased. However, controlling owners - often founding families - remained in control by resorting to extensive use of dual-class shares, control rights, which separate from cash-flow. This was an important determinant of firm performance, eradicating the positive influence of institutional ownership.

Suggested Citation

  • Bjuggren, Per-Olof & Eklund, Johan & Wiberg, Daniel, 2013. "Institutional Ownership and Returns on Investment," Ratio Working Papers 208, The Ratio Institute.
    • Handle: RePEc:hhs:ratioi:0208
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    References listed on IDEAS

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    Cited by:

    1. Nordström, Louise & Wiberg, Daniel, 2009. "Determinants of Buyouts in Private Equity Firms," Working Paper Series in Economics and Institutions of Innovation 207, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    2. Louise Nordström, 2011. "Determinants of buyouts in private equity firms," ERSA conference papers ersa10p1450, European Regional Science Association.

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    More about this item

    Keywords

    Corporate governance; institutions; ownership; performance; Tobin’s q; marginal q;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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