Harvard Law School Forum on Corporate Governance and Financial Regulation– In common ownership, the type of the common owner institution matters. Institutional ownership of firms has seen a marked rise in the past few decades, with average institutional ownership share of a firm rising from 20% to 30% in the 1980s to over 65% of the total by the 2010s, with residual retail ownership correspondingly falling from 80% to less than 35% of the firm. (See Borochin, Paul, and Jie Yang (2017). The Effects of Institutional Investor Objectives on Firm Valuation and Governance, Journal of Financial Economics 126.) Over the same period, the fraction of the average firm held by institutions holding blocks of same-industry rivals has risen from 4.5% to 28%. (See He, Jie, J. Huang, 2017, Product Market Competition in a World of Cross Ownership: Evidence from Institutional Blockholdings, The Review of Financial Studies 30.) This not only changes the portfolio properties of the institutional investors, but also has the potential to change the corporate strategies of held firms. Recent studies find opposing effects of common institutional ownership on the competitive behavior of firms:
Paul Borochin
Celebrations
School Honors Faculty Whose Accomplishments Shine Brightly; Professor Golec Awarded ‘Research Excellence’ Honor
Finance professor Joe Golec, a scholar who keeps a running list of at least 100 potential research topics at all times, was awarded the School of Business’ top honor this spring, its Award for Research Excellence.
Meanwhile accounting professors Yanhua “Sunny’’ Yang and Michael Willenborg earned the School of Business’ Best Paper award for a highly regarded research paper about IPO prices. One of the reasons she chose to work at UConn, Yang said, was the value the University places on research distinction. Continue Reading
Do Managers Seek Control and Entrenchment?
The CLS Blue Sky Blog – Do managers seek control of the firm, or the level of ownership consistent with entrenchment? Entrenched managers own shares within a range which is high enough to give them control, but sufficiently low to make other shareholders bear the brunt of their non-value maximizing actions. There is a large literature on how entrenched managers can benefit themselves by extracting wealth from other shareholders, but conclusive evidence that managers seek entrenchment is currently lacking.