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Institutional ownership and returns on investment

PublicationArticle (with peer review)
Ägarskap, Bolagsstyrning, Corporate governance, Daniel Wiberg, Företagandets villkor, Johan Eklund, Marginal q, Per-Olof Bjuggren, Performance, Tobin’s q

Abstract

This paper examines how institutional investors influence investment decisions and returns on investment. To measure investment performance, we use marginal q, which measures the ratio of the return on investment to the cost of capital. Institutional owners are found to have a positive but marginally diminishing effect on performance. Our paper uses longitudinal data on Swedish firms from 1999 to 2005; during this period, the ownership structure of Swedish firms underwent dramatic changes as institutional investors increased their ownership shares, while ownership by Swedish households decreased. However, controlling owners – who were often founding families – maintained their control of firms by resorting to extensive use of dual-class shares. This was an important determinant of firm performance that eradicated the positive influence of institutional ownership.
Related content: Working Paper No. 208

Bjuggren, P.-O., Eklund, J,. & Wiberg, D. (2016). Institutional ownership and returns on investment. Corporate Ownership and Control, 13(4), 419-430. DOI: 10.22495/cocv13i4c3p1


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