Journal of Management & Governance

, Volume 11, Issue 4, pp 405–428

Can institutional investors fix the corporate governance problem? Some Danish evidence


DOI: 10.1007/s10997-007-9038-1

Cite this article as:
Rose, C. J Manage Governance (2007) 11: 405. doi:10.1007/s10997-007-9038-1


It has been advocated within corporate governance that institutional investors may discipline management in listed firms and thereby alleviate the free rider problem associated with dispersed ownership. This article tests this hypothesis using a sample of Danish listed firms during 1998–2001 determining, whether ownership by institutional investors impacts performance, measured by Tobin’s q. Using three stage least squares, it is shown that aggregate ownership by institutional investors does not influence firm performance. However, when decomposing the results, it is found that joint ownership by the largest two Danish institutional investors, has a significant negative impact firm performance. Ownership by banks and to a lesser extent insurance companies significantly influences firm performance positively. The results somehow challenge the conventional wisdom, arguing that the black box view of institutional investors should be abandon. Therefore it is suggested that a more careful analysis should be devoted to each institutional investors own legal environment.


Corporate governance Institutional investors Concentrated ownership Agency costs 

JEL Classification

L25 G2 G3 

Copyright information

© Springer Science+Business Media, LLC. 2007

Authors and Affiliations

  1. 1.Department of International Economics and ManagementCopenhagen Business SchoolFrederiksbergDenmark

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