Internalizing governance externalities : The role of institutional cross-ownership
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 400-418 |
| Journal / Publication | Journal of Financial Economics |
| Volume | 134 |
| Issue number | 2 |
| Online published | 25 Mar 2019 |
| Publication status | Published - Nov 2019 |
Link(s)
Abstract
We analyze the role of institutional cross-ownership in internalizing corporate governance externalities using granular mutual fund proxy voting data. Exploiting within-proposal and within-institution variation, we show that an institution's holdings in peer firms are positively associated with the likelihood that the institution votes against management on shareholder-sponsored governance proposals. We further find that high aggregate cross-ownership positively predicts management losing a vote. Overall, our results provide evidence that cross-ownership incentivizes institutional investors to play a more active monitoring role, suggesting that institutional cross-ownership serves as a market-based mechanism to alleviate the inefficiency induced by governance externalities.
Research Area(s)
- Corporate governance, Cross-ownership, Externalities, Institutional investors, Proxy voting
Citation Format(s)
Internalizing governance externalities : The role of institutional cross-ownership. / He, Jie (Jack); Huang, Jiekun; Zhao, Shan.
In: Journal of Financial Economics, Vol. 134, No. 2, 11.2019, p. 400-418.Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
