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Three essays on corporate finance

We examine whether the monitoring effectiveness of institutional investors varies with the number of stocks they hold as the largest institutional blockholder (institutional blockholding number). We find that a larger institutional blockholding number is associated with higher nonroutine CEO turnover-performance sensitivity, more frequent proxy voting against management, and higher abnormal returns around forced CEO turnover announcements and Schedule 13D filings. These results are particularly evident when institutional investors have multiple blockholdings in the same industry, when they have prior nonroutine CEO turnover experience in their other portfolio firms, or when their aggregate holding periods of block ownership in their portfolio firms are longer. Moreover, the change in Tobin’s q is higher for firms with a larger institutional blockholding number than for firms with a smaller institutional blockholding number. Our results suggest that information advantages resulting from past learning are important channels through which institutional investors with multiple blockholdings perform effective monitoring.