Investment Duration and Corporate Governance

Lee, Youngjoo; Chung, Kee H.

doi:10.2139/ssrn.2023762

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Investment Duration and Corporate Governance

44 Pages Posted: 17 Mar 2012 Last revised: 29 Aug 2014

See all articles by Youngjoo Lee

Youngjoo Lee

State University of New York (SUNY) - Buffalo

Kee H. Chung

State University of New York at Buffalo - School of Management

Date Written: August 28, 2014

Abstract

This paper analyzes the relation between institutional investment duration and corporate governance using a new metric of investment duration that accounts for firm-specific investment durations of each institution. We conjecture that institutional investors that hold a firm’s shares for a longer duration have greater incentives and ability to influence the firm’s governance structure. Consistent with this conjecture, a broadly defined index of corporate governance increases with the duration of institutional ownership. We also show that the relation between investment duration and corporate governance varies across different types of institutions and across firms with different levels of stock market liquidity.

Keywords: institutional investors, corporate governance, investment duration, monitoring incentive

JEL Classification: G20, G34

Suggested Citation: Suggested Citation

Lee, Youngjoo and Chung, Kee H., Investment Duration and Corporate Governance (August 28, 2014). Available at SSRN: https://ssrn.com/abstract=2023762 or http://dx.doi.org/10.2139/ssrn.2023762