Evidence on the Governance Role and Investment Strategy Performance of Boutique Institutional Investors
Abstract
I identify an unexplored type of institutional investor (equity boutiques) that are characterized
by their relatively small size but highly concentrated investment strategy. This concentrated strategy
suggests that boutiques have the incentive to monitor management, but their limited assets
under management cast doubt on whether they will be influential. In the context of discretionary
investment decisions, I find evidence that boutiques oversee management by curbing myopia. Even
though boutiques are small, they still appear to be influencial. Empirical evidence suggests that
this influence comes, in part, from their expertise, which is heeded by other institutional investors.
I also examine whether boutique investors earn abnormal returns on their investments and provide
insights into the potential sources of those returns. More specifically, consistent with the notion
that boutiques have expertise and an information advantage, I find that boutiques earn abnormal
returns and that these returns are earned in part by exploiting information incremental to publicly
available information.
Citation
Needles, Abigail Marian (2018). Evidence on the Governance Role and Investment Strategy Performance of Boutique Institutional Investors. Doctoral dissertation, Texas A & M University. Available electronically from https : / /hdl .handle .net /1969 .1 /173677.