Does governance travel around the world？ Evidence from institutional investors.pdfVIP

Journal of Financial Economics 100 (2011) 154–181 Contents lists available at ScienceDirect Journal of Financial Economics journal homepage: www.elsevier.co m/locate/jfec Does governance travel around the world? Evidence from institutional investors $ Reena Aggarwal a,n, Isil Erel b, Miguel Ferreira c, Pedro Matos d a McDonough School of Business, Georgetown University, Washington, DC 20057, USA b Ohio State University, OH, USA c Universidade Nova de Lisboa, Faculdade de Economia, Lisbon, Portugal d University of Southern California, CA, USA a r t i c l e i n f o a b s t r a c t Article history: We examine whether institutional investors affect corporate governance by analyzing Received 8 September 2009 portfolio holdings of institutions in companies from 23 countries during the period 2003– Received in revised form 2008. We find that firm-level governance is positively associated with international 2 June 2010 institutional investment. Changes in institutional ownership over time positively affect Accepted 28 June 2010 Available online 28 October 2010 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 JEL classification: in promoting governance improvements outside of the U.S. Institutional investors affect G32 not only which