Stewardship Code, Institutional Investors, and Firm Value: International Evidence

This study investigates whether the stewardship code mitigates the free-rider problem of institutional investors. We construct panel data of listed firms in 56 countries and examine the effects of the introduction of stewardship codes in 13 countries using a difference-in-differences approach. Our results show that the introduction of the stewardship code in a country increases the value of firms with high institutional ownership. It also mitigates the free cash flow problem of the portfolio firms with low investment opportunities. To the best of our knowledge, this is the first study that provides international evidence that stewardship codes are effective in enhancing monitoring by institutional investors.