How Institutional Ownership Affects Insider Trading

Institutional owners have traditionally been thought of as passive investors that have little concern for or influence on corporate policies and decisions. In contrast, recent literature shows that while many institutions are passive in terms of their investment choices and holdings, they are not passive in their role as monitors. For example, Appel et al. (2016) find that index mutual funds influence firms’ governance choices. Others find institutional owners exert influence over firms’ dividend choices (Crane et al. (2016)) and corporate tax strategies (Bird and Karolyi (2017), Khan et al. (2017)). In a new study, we examine how institutional ownership … Read more