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Abstract
This paper examines the relationship between firm investment ratios and institutional blockholders for a sample of 6300 publicly traded firms in 16 large emerging markets for the 2004–2016 period. Results show that independent, long-term, and local institutional investors boost investment ratios, and this is consistent with the monitoring role and blockholder voice intervention hypotheses. The presence of institutional blockholders, regardless of their monitoring involvement, reduces firm cash flow sensitivity ratios and thus, firms' financial constraints. Minority institutional investors complement the positive effect of blockholder investors. However, the effect on financial constraints decreases as the quality of the country's institutions increases.
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