Does Governance Travel Around the World? Evidence from Institutional Investors


We examine whether institutional investors affect corporate governance by analyzing portfolio holdings of institutions in companies from 23 countries during the period 2003 – 2008. We find that firm-level governance is positively associated with international institutional investment. Changes in institutional ownership over time positively affect subsequent changes in firm-level governance, but the opposite is not true. Foreign institutions and institutions from countries with strong shareholder protection play a role in promoting governance improvements outside of the U.S. Institutional investors affect not only which corporate governance mechanisms are in place, but also outcomes. Firms with higher institutional ownership are more likely to terminate poorly performing Chief Executive Officers (CEOs) and exhibit improvements in valuation over time. Our results suggest that international portfolio investment by institutional investors is associated with good corporate governance practices around the world. JEL classification: G32, G34, G38

16 Figures and Tables

Citations per Year

66 Citations

Semantic Scholar estimates that this publication has 66 citations based on the available data.

See our FAQ for additional information.

Cite this paper

@inproceedings{Aggarwal2009DoesGT, title={Does Governance Travel Around the World? Evidence from Institutional Investors}, author={Reena Aggarwal and Miguel Alexandre Ferreira and Nova de Lisboa and Pedro Matos and Andr{\'e}s Almaz{\'a}n and Utpal Bhattacharya and Mariassunta Giannetti and Andrew Karolyi and David McLean and Urs Peyer and Stefano Marco Maria De Rossi and Bill Schwert}, year={2009} }