Abstract
This paper investigates the role of institutional investor centrality, measured by the number of co-ownership ties, in firm value. Using US data over the period 2001-2013, we document that block-holdings from more central institutional investors enhance firm value more than those held by other investors. We do not find evidence that this increase in value is due to monitoring, advisory, or information cost effects. Our findings are consistent with the view that central institutional investors provide a certification of firm value. We also show that institutional centrality displays an effect over and beyond investor portfolio characteristics. The documented effects are robust to alternative specifications of network centrality and to endogeneity concerns.
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