FIN-03-033 |
NYU Stern School of Business |
November 2003
Marcia Millon Cornett, Alan J. Marcus, Anthony Saunders and Hassan Tehranian
ABSTRACT
This paper examines the relationship between institutional
investor involvement in and the operating performance of large
firms. We confirm a significant relationship between a firm’s
operating cash flow returns and both the percent of institutional
stock ownership and the number of institutional stockholders.
However, the positive relationship between the number of institution
al investors holding stock and operating cash flow returns is found
only for pressure-insensitive institutional investors (those with
no business relationship with the firm). The number of
pressure-sensitive institutional investors (those with an existing
or potential business relationship with the firm) has no impact on
performance. These results suggest that institutional investors
that need to protect actual or promote potential business
relationships with firms in which they invest are compromised as
monitors of the firm, and lend credence to calls for greater
independence of board members from firms.
Marcia Millon Cornett
Institution: College of Business and Administration, Southern Illinois University, Carbondale, IL 62901.
Telephone: (618) 453-1417
Email: mcornett@cba.siu.edu
Alan J. Marcus
Institution: Wallace E. Carroll School of Business, Boston College, Chestnut Hill, MA 02467
Telephone: (617) 552-2767
Email: alan.marcus@bc.edu
Anthony Saunders
Institution: John M. Schiff, Professor of Finance, Leonard N. Stern School of Business, New York University
Telephone: 212-998-0711
Fax: 212-995-4233
Email: asaunder@stern.nyu.edu
Home Page: http://www.stern.nyu.edu/~asaunder
Hassan Tehranian
Institution: Wallace E. Carroll School of Business, Boston College, Chestnut Hill, MA 02467
Telephone: (617) 552-3944
Email: hassan.tehranian@bc.edu
To download a copy of this paper click here
To request a copy of this paper click here
|