How Are Large Institutions Different from Other Investors? Why Do These Differences Matter?

In this paper, we analyze how large institutions differ from other investors and the implications that these differences have for stock returns, market liquidity, and corporate governance. We find that large institutional investors -- a category including all managers with greater than $100 million in discretionary control -- have nearly doubled their share of the common-stock market over the 1980 to 1996 period, with this increase driven primarily by the largest one-hundred institutions.