Which institutional investors matter for firm survival and performance?

•How institutional investors impact survival/performance of underperforming firms.•Contrast underperformer results to results for consistently overperforming firms.•Find material differences in investor roles and investment returns between samples.•Underperformer results: negative for activist pension funds and long-term holders.•Underperformer results: positive for activist hedge funds and short-term holders.

Using data that spans three decades, we assess the diverse roles of institutional investors in impacting survival and performance of chronically underperforming firms and contrast the results for consistently overperforming firms. We find material differences in investor roles and investment returns between these samples. Differentiating among institutional types, controlling for prior performance and attrition bias provides insights unattainable by examining aggregated holdings. For underperformers, results are negative for activist pension funds and long-term institutions, positive for activist hedge funds and short-term institutions, and mixed for institutional blockholders.