Title: Who contributes to a firm's long-term performance, major institutional investors or the CEO?

Authors: Lin Chen; Xia Zhang; Dongfang Nie

Addresses: College of Business, Valparaiso University, Valparaiso, IN 46383, USA ' Department of Accounting and Finance, College of Business and Public Affairs, Alabama A&M University, Huntsville, AL 35811, USA ' Department of Accounting, Finance, and Economics, College of Business, University of Texas Permian Basin, Odessa, TX 79762, USA

Abstract: In this study, we hypothesise and find that major institutional investors significantly contribute to a firm's long-term financial performance. We also find that the contribution is mainly driven by pressure-resistant institutional investors. We further find that CEO pay slice as a proxy of CEO power is negatively related to a firm's long-term performance, while CEO duality has no association with firm performance. Our findings help to disapprove Jamie Dimon's argument that shareholders who aim at cutting his pay and forcing him to give up his role as chairman of the board of directors are 'lazy' and 'irresponsible' about the firm's long-term performance. Our study contributes to the literature that investigates the effect of corporate governance in mitigating agency problems.

Keywords: institutional investors; pressure-resistant institutional investors; pressure-sensitive institutional investors; CEO duality; CEO pay slice; firm's long-term performance.

DOI: 10.1504/IJAF.2020.118840

International Journal of Accounting and Finance, 2020 Vol.10 No.4, pp.212 - 232

Received: 13 May 2020
Accepted: 25 May 2021

Published online: 08 Nov 2021 *

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