Abstract
The significance of institutional owners in monitoring corporate behavior is still to
be explored deeply in Pakistan. This present study investigates the influential
impact of different groups of institutional owners on performance of firms through
its ability to discipline management. The role of institutional shareholders in
monitoring corporate behavior is determined by using operating performance and
investment efficiency measures on panel data set of two industries including
cement industry and food and personal care products’ industry for the period 2006
to 2014. Operating performance is measured by using net profit margin ratio
whereas sales growth ratio, expense ratio and production costs ratio are used as
proxies for measuring the investment efficiency. The findings show that in case of
cement sector, mutual funds, and modaraba companies are playing an influential
role in improving the performance of firms and in preventing the opportunistic
behavior of managers. The results for food and personal care products sector
show a significant impact of banks on firms’ production cost ratio; however, the
sign of the coefficient is not in accordance to the formulated hypothesis.
