Common Institutional Investors and Operating Cash Flow Manipulation : Effective Monitoring or Tacit Collusion?

There is still no consensus on whether common institutional investors exercise effective monitoring of managers or tacitly collude with managers in corporate governance. This study examines the role played by common institutional investors in corporate governance from the perspective of operating cash flow manipulation. This evidence suggests that common institutional investors promote company’s cash flow manipulation, a result that still holds under a series of robustness tests. In addition, this study finds a more pronounced positive association between common institutional investors on cash flow manipulation at lower executive ownership ratios and state-owned holding companies