Institutional ownership and senior-level executives' tenure

In this paper, the authors document a positive relationship between senior-level executives' tenure and the shareholdings of institutional investors in US public firms between 1992 and 2013. The authors find that executive tenure is higher in the presence of institutional investors, and tenure is positively related to both the proportion of shares held by the institutional investors and the stability in their shareholdings. The results suggest that there exists a clientele effect with respect to the choice of senior executives by institutional investors. The authors further document that the positive relationship is true for pressure-sensitive institutional investors but not for pressure-insensitive ones. Our findings suggest that investors that have business ties with firms, other than their investments, are more likely to support a long-term working relationship with the firm executives.