Internalizing governance externalities: The role of institutional cross-ownership

• 成果类型: Article
• 署名作者: He, Jie (Jack); Huang, Jiekun; Zhao, Shan
• 署名单位: University System of Georgia; University of Georgia; University of Illinois System; University of Illinois Urbana-Champaign; City University of Hong Kong
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.07.019
• 发表日期: 2019
• 页码: 400-418
• 关键词: CORPORATE GOVERNANCE; externalities; cross-ownership; Proxy voting; institutional investors

摘要

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. (C) 2019 Elsevier B.V. All rights reserved.