Common institutional ownership and corporate misconduct

Abstract

This paper explores the relationship between common institutional ownership and corporate misconduct. Empirical evidence indicates that common institutional blockholders (institutional blockholders with multiple blockholdings), with advantages in information, experience and resources, can effectively inhibit corporate misconduct. Furthermore, the inhibitory effect is stronger in firms prone to commit misconduct. Empirical results also support the role of state blockholders with multiple blockholdings and common institutional blockholders with high ownership proportions in restraining corporate misconduct. This paper contributes to the heated debate on the economic implications of common ownership and provides additional evidence for the role of common blockholders in Chinese capital markets.

Tax incentives, common institutional ownership, and corporate ESG performance

“…To further establish the robustness of the conclusion that trade integration (TI) can enhance corporate ESG performance, this paper substitutes the core dependent variable with ESG rating data provided by China's rating agency, Huazheng. Following the approach of Wang et al (2023) and others, a numerical value of 1 to 9 was assigned to the CCC‐AAA nine‐grade rating data, with lower ratings receiving lower values. As shown in Table 4, the regression results indicate that TI has a coefficient of 0.4, significantly significant at the 1% level, when using the ESG performance based on Huazheng's ratings, denoted as .…”

“…Institutional investors are crucial stakeholders and play a significant role in external governance, influencing strategic decisions within companies (Chung & Zhang, 2011). Common institutional ownership refers to institutional investors simultaneously holding stocks in two or more companies within the same industry (Wang et al, 2023). Current academic discussions on this topic primarily revolve around collusion fraud and collaborative governance (Yao et al, 2023).…”

Common institutional ownership and green innovation in family businesses: Evidence from China

“…Studies that hold a synergistic governance effect perspective find that common institutional ownership increases market share (He & Huang, 2017) and the number of patent applications of listed firms (Gao et al, 2019), enhances merger and acquisition (M&A) performance (Brooks et al, 2018), increases philanthropic giving (Fu & Qin, 2022) and reduces surplus management (Ramalingegowda et al, 2020). Due to the role of industry hubs, listed companies with common institutional ownership have better governance effects (Kang et al, 2018), enabling common institutional investors to better fulfill their monitoring function (He et al, 2019) and inhibit corporate misconduct (Wang et al, 2022). Literature holding the collusive fraud effect view suggests that driven by the purpose of portfolio value maximization, common institutional investors may strategically intervene in investee firms, increasing the collusive tendency of firms in the same industry and disrupting the market order (Azar et al, 2018).…”

“…On the other hand, as investors in multiple firms in the same industry, common institutional investors are more motivated and capable of acting as external supervisors than ordinary institutional investors (He et al, 2019; Kang et al, 2018). Having accumulated sufficient managerial knowledge and supervisory experience during their involvement in corporate governance, common institutional investors can improve corporate governance through active communication, voting against, and the threat of exiting (Edmans et al, 2019; Wang et al, 2022), which can mitigate agency conflicts and optimize corporate governance mechanisms (Li & Liu, 2023). Moreover, since the technology, experience and knowledge required for green innovation are relatively complex and diverse (Xie et al, 2019), the professional intervention of common institutional investors may optimize the established green innovation strategy of the family business and promote the rational allocation of resources for green innovation.…”

“…Compared to other shareholders and ordinary institutional investors, common institutional investors are “industry hubs” in the capital market and have advantages regarding private information, management knowledge and industry experience (Kang et al, 2018; Koch et al, 2021). Moreover, as specialized majority shareholders, common institutional investors often aim to hold stakes in multiple companies (Ramalingegowda et al, 2020; Wang et al, 2022). Therefore, they have more incentives to exert substantial influence on corporate management and influence corporate strategic decisions (Gao et al, 2019; Koch et al, 2021).…”