Do the Presence and Position of the Institutional Blockholder Affect Firm Performances?

This study analyzes how the performance of Korean listed companies is influenced by presence and position of institutional blockholder. The sample uses 681 Korean listed company data from 2005 to 2013. If there is at least one institutional blockholder among first, second, and third blockholder within a firm, we regard it as the presence of institutional blockholder. If the first and the second blockholder are institutional blockholder within a firm, we regard it as the position of institutional blockholder. We use Tobin’s Q and ROA as substitutes for firm performances. When institutional blockholder has at least one among the first to the third blockholder, we found that it has a positive effect on Tobin’s Q and ROA. When the first or the second blockholder within a firm are institutional blockholder, we also found that it has a positive impact on Tobin’s Q and ROA. This result suggests that institutional investor support the efficient monitoring hypothesis that corporate performance is enhanced by monitoring, and there is a possibility of supporting institutional investor's behavioral viewpoint within the firm. Our findings confirm the hypothesis that institutional blockholder monitors effectively and support the view that investor activism affects firm performance.