ABSTRACT:- In this study we examine the relation between corporate governance and institutional ownership. The fraction of a company’s shares that are held by institutional investors increases with the quality of its governance structure. In a similar vein, the proportion of institutions that hold a firm’s shares increases with its governance quality. They are robust to different estimation methods and alternative model specifications. These are consistent with the conjecture that institutional investors gravitate to stocks of companies with good governance structure to meet fiduciary responsibility as well as to minimize monitoring and exit costs.

Key words:- Corporate governance; Institutional ownership; Fiduciary responsibility; Monitoring costs; Liquidity; Trading costs