The roles of institutional owners in alleviating agency problem and its effect on firms have been studied extensively in corporate finance. However, these researches have mixed results because most have treated institutional owners as a homogenous group. Drawing on previous research, this study differentiates institutional owners as transient or dedicated owners. These two groups of institutional owners differ significantly in terms of size of holdings, purposes, goals as well as monitoring efforts. The objective of this study is to determine how the institutional ownership structure i.e. transient or dedicated ownership affect firm performance within the context of agency theory. To determine whether treating the sample homogenously or heterogeneously has different effects on firm performance, this study also examine the effect of total ownership (whereby the sample is treated homogeneously) on firm performance. Using panel data that span from 2002 to 2006, several hypotheses are tested based on data of firms listed on Bursa Malaysia’s Kuala Lumpur Composite Index (KLCI) using hierarchical regression analysis methodology. The empirical results indicate that total institutional ownership and dedicated ownership have no significant effect towards firm performance. Transient ownership, however, has statistically significant effect on firm performance. These results show that institutional ownership is heterogeneous with transient ownership structure monitor the management themselves. The establishment of the differing effect of institutional ownership due to the heterogeneous nature of ownership suggests that future research in this area must take into account the heterogeneity.