Foreign institutional investors and the great productivity slowdown

This article analyzes the impact of institutional investors on firm productivity duringthe financial crisis 2008/09 across European manufacturing industries. Using propen-sity score matching combined with a difference in differences estimator I find a positivesignificant effect of 2% of foreign institutional ownership. Employing a variety of prox-ies for financial constraints, the article shows that the effect is driven by industries,countries, and firms that are more financially constrained indicating that foreign insti-tutional ownership prevents the known productivity slowdown during the financial crisisby alleviating financial constraints.