The effect of institutional ownership type on the performance in companies listed in Tehran Stock Exchange (1998-2006)

The spate of corporate scandals in the last years points to a failure of corporate governance in effective monitoring on managers decisions and corporate performance. Reforms require the increasing in effective monitoring on corporate performance. One of effective mechanism on corporate governance is the emergence of institutional investors that is very important. Institutional investors have ability and incentives to monitor the companies. In this study, institutional ownership role in the corporate performance is examined from 1998 to 2006. Three indexes (tobins,Q, return on assets and net income margin) are used to measure corporate performance. The results demonstrate evidence of a positive association between institutional ownership and corporate performance. In addition, this study classifies Institutional investors in two categories (active Institutional ownership and inactive Institutional ownership) and examines their relationship with corporate performance. Findings always show that these two types of institutional investors significantly positive related to corporate performance. Therefore we don, t say that being active and inactive affect on monitoring role of institutions.