The prudential effect of strategic institutional ownership on stock performance

Belghitar, Yacine and Clark, Ephraim A. and Kassimatis, Konstantinos (2011) The prudential effect of strategic institutional ownership on stock performance. International Review of Financial Analysis, 20 (4). pp. 191-199. ISSN 1057-5219

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Official URL: http://dx.doi.org/10.1016/j.irfa.2011.04.002

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Abstract

This paper examines the effect of prudentially obligated strategic institutional ownership on the performance of firm stock returns. Using the concept of marginal conditional stochastic dominance (MCSD), performance is measured to include the whole distribution of stock returns instead of limiting itself to the first two moments of mean and variance. It provides strong evidence that prudentially obligated strategic institutional ownership is consistent with the fiduciary responsibility of prudential investment behaviour and that it is performance enhancing as well. Our results also provide evidence that although the effects of “pressure sensitive” and “pressure resistant” institutions affect the individual measures of risk aversion (moments of the distributions) differently, when the total distribution is considered, both types of institutional ownership reflect prudence and are performance enhancing. These results are robust with respect to a range of conventional control variables and estimation techniques.

Item Type:Article
Keywords (uncontrolled):Ownership; institutions; marginal conditional stochastic dominance; performance; value
Research Areas:Business School > Accounting and Finance
ID Code:8555
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Deposited On:05 Mar 2012 07:16
Last Modified:02 Jul 2014 11:27

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