Institutional ownership, strategic choices and corporate efficiency: Evidence from Japan

Based on the tenets of capital allocation systems theory, stewardship theor y, and 'going concern' concept of business, institutional ownership is prop osed to affect corporate productivity both directly and indirectly, in larg e Japanese corporations through a set of four firm-level choices: product / market development, R&D intensity capital intensity and leverage. Using da ta on 118 corporations drawn from five industry sectors in Japan, and apply ing a partial mediation technique, this study tests an integrated, causal m odel of the relationships among these variables. Results show mixed support for the model. No direct relationship between institutional ownership and productivity is observed. However, institutional ownership affects producti vity indirectly through R&D intensity and leverage. Although product / mark et development and capital intensity also affect productivity, institutiona l ownership has no significant relationship with them.