Goergen, Marc , Renneboog, Luc and Zhang, Chendi (2008) Do UK institutional shareholders monitor their investee firms? Journal of Corporate Law Studies, 8 (1). pp. 39-56. ISSN 1473-5970.

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Abstract

As institutional investors are the largest shareholders in most listed UK firms, one expects them to monitor the
firms they invest in. However, there is mounting empirical evidence which suggests that they do not perform any
monitoring. This paper provides a new test on whether UK institutional investors engage in monitoring. The test
consists of an event study on directors’ trades. If institutional shareholders act as monitors, their monitoring activities convey new information about a firm’s future value to other outside shareholders and reduce the
informational asymmetry between the managers and the market. As a result, directors’ trades convey less information to the market, and the stock price reaction is weaker. However, our results show that institutional shareholders do not have any significant impact on the stock price reaction which stands in marked contrast with the impact that families, individuals and other firms have on stock prices.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Corporate Law Studies
Publisher:	Hart Publishing Ltd.
ISSN:	1473-5970
Official Date:	April 2008
Dates:	Date Event April 2008 Published
Volume:	8
Number:	1
Number of Pages:	18
Page Range:	pp. 39-56
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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