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Selected Works of Sébastien Michenaud
Article
Institutional Investor Cliques and Governance
Journal of Financial Economics (2019)
  • Alan D. Crane, Rice University
  • Andrew Koch, University of Pittsburgh
  • Sébastien Michenaud, DePaul University
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Abstract
We examine the impact of investor coordination on governance. We identify coordinating groups of investors ("cliques") as those connected through the network of institutional holdings. Clique members vote together on proxy items: a one-standard-deviation increase in clique ownership more than doubles votes against low quality management proposals. We use the 2003 mutual fund trading scandal to show that this effect is causal. These findings suggest coordination strengthens governance via voice. Coordination, however, also weakens governance via threat of exit. Clique owners exit positions more slowly and firm value responds negatively to liquidity shocks when clique ownership is high.
Keywords
  • Institutional Investors,
  • Governance,
  • Coordination
Disciplines
Publication Date
July, 2019
DOI
10.1016/j.jfineco.2018.11.012
Citation Information
Alan D. Crane, Andrew Koch and Sébastien Michenaud. "Institutional Investor Cliques and Governance" Journal of Financial Economics Vol. 133 Iss. 1 (2019) p. 175 - 197 ISSN: 0304-405X
Available at: http://works.bepress.com/sbastien-michenaud/1/