The role of institutional investors as capital market monitors has gradually expanded since 1995, and study on this is very active. Therefore, this study aims the role of institutional investors in the process of determining firm value and management based on the accumulated study results on institutional investors through meta-analysis and empirical studies.
Firstly, the meta-analysis was conducted on 104 domestic and 44 overseas studies. As a result of meta-analysis, it was founded that institutional investors and foreign investors has a positive effect on firm value or stock price, whereas only foreign investors has a significant positive effect in divedend and treasury stock purchases in domestic studies. In addition, it shows that institutional investors and foreign investors play a positive role in manangement decisions such as corporate investment and cost. As a result of meta-analysis of overseas
studies, the effect on firm value and stock price was consitent with domestic studies, but the effect on manangement decision-making was found to have a significantly positive effect only on foreign investors. It was confirmed that the management monitoring effect of foreign investors was greater than that of
institutional investors.
The second emprical study aims to investigate the relationship between shared value creation and firm value and the moderating effect of institutional blockholders on the relationship. Using longitudinal data from 2011 to 2016, this study carry out panel regression analyses in order to explore the monitoring role of institutional blockholders. The empirical findings are as follows. First, there is a positive relationship between SVC and firm value. Second, the presence of institutional blockholders is likely to reinforce the relationship between SVC and
firm value. Furthermore, we categorize institutional investors into three groups including foreign blockholders, NPS and domestic blockholders. While foreign blockholders and NPS positively moderate the relationship between SVC and firm value, domestic blockholders negatively moderate the relationship. Third, we divide institutional investors into two groups based on investment purpose: block investors for management control and block investors for portfolio investment. We find that institutional blockholders for management control are likely to mitigate the relationship between SVC and firm value.
This results suggest that institutional blockholders for management control purpose and domestic blockholders are limited to monitoring potential agency problems, whereas foreign blockholders and NPS may be effective monitors over the management. This study provides clues to the extant findings concerning the impact of shared value creation on firm value and the role of outside blockholders in the Korean stock market.
The third empirical study aims to highlight on the relationship between corporate non-business real estate and firm vlaue and foreign investors. Corporate non-business real estate can be used as a way for private benefits of
controlling shareholders, while it is likely to contribute enhancing shareholder wealth. This study explores the impact of corporate governance to address the contradiction, particularly, ownership-control disparity on non-business real estate. This study further examines the moderating effect of foreign blockholders on the relationship, followed by the additional analyses on the relationship between non-business real estate and firm value. The results are as follows. First, the disparity has a consistently positive relationship with non-business
real estate, which implies that corporate non-business real estate can be utilized as a way for expropriation for the benefit of controlling shareholders. Second, the relationship between the disparity and non-business real estate is mitigated by foreign blockholders. Third, we find that non-business real estate has a negative relationship with firm value. This result implicates inefficiency of non-business real estate and the possibility of agency problem. Forth, investment in non-business real estate is likely to decrease firm value subsequently, compared with investment in core business. This study revisits and extends corporate governance research in terms of non-business real estate by identifying the presence of agency problem and monitoring effect of outside blockholders.
The last emprical study aims to clarify that gender diversity on corporate board take effect firm value and the role of institutional investors in the relationship between gender diversity and firm value. The amended Act on
Financial Investment Services and Capital Markets Act stipulates that listed firms with assets of 2 trillion won or more should have at least one woman on their boards. This study aims to explore the impact of board gender diversity on firm value and the role of institutional blockholders on the relationship. The results are as follows. First, the board gender diversity is positively related to firm value regardless of markets, firm size, industry. Second, foreign blockholders reinforce the positive relationship between board gender diversity and firm value, while domestic blockholders mitigate the relationship. Third, board gender diversity and firm value has an inverted U shape relationship. Firm value increases with the proportion of female directors to a certain level,
after which it decreases. The optimal board structure was reached when the ratio of female directors was between 18 and 44 percent, up to conditions. This finding provides an insightful grounds on the effectiveness of the revised Act, regarding appointment of female directors and gives a guideline for policy makers by suggesting optimal level of board gender structure.