This study examines the relationship between institutional ownership, managerial behavior, and corporate performance in S&P 500 firms. Utilizing a microeconomic framework of managerial utility, a positive relationship is hypothesized between “pressure-insensitive” institutional ownership concentration and corporate performance; as the concentration of ownership by hedge funds and asset management firms grows in the domestic corporation, so too does a manager’s incentive to engage in profit-maximizing activity. Using a series of multivariate regressions, this study finds statistical evidence that pressure-insensitive institutional ownership concentration is a significant, albeit negative determinant of corporate performance by measure of operating returns. The inverse empirical relationship witnessed between pressure-insensitive institutional ownership concentration and operating returns is interpreted as contemporary evidence that activist institutional investors target underperforming firms and seek to invoke change thereafter.
Fenton, Eric, "Institutional Ownership and Corporate Performance: An Empirical Analysis of America's Publicly-Held Firms" (2018). Senior Independent Study Theses. Paper 8061.
Bachelor of Arts
Senior Independent Study Thesis
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