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Do Institution Investors Exacerbate Managerial Myopia?

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  • McConnell, John J.
  • Wahal, Sunil

Abstract

This study analyzes corporate expenditures for property, plant and equipment (PP&E) and research and development (R&D) for over 2,500 firms from 1987 to 1994. We document a positive relation between expenditures for PP&E and R&D and institutional share ownership. This relation is robust to a variety of specifications. We examine the link between firm-level expenditures and institutional ownership by using lead-lag structures and changes in institutional ownership. The data do not support the contention that institutional investors cause corporate managers to behave myopically. Indeed, the data indicate that the presence of institutional shareholders allows managers to invest more in PP&E and R&D than would individual shareholders.

Suggested Citation

  • McConnell, John J. & Wahal, Sunil, 1998. "Do Institution Investors Exacerbate Managerial Myopia?," Purdue University Economics Working Papers 1112, Purdue University, Department of Economics.
    • Handle: RePEc:pur:prukra:1112
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    File URL: https://business.purdue.edu/research/Working-papers-series/Year-1998/1112.pdf
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    Cited by:

    1. Mishra, Chandra S., 2022. "Does institutional ownership discourage investment in corporate R&D?," Technological Forecasting and Social Change, Elsevier, vol. 182(C).

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