Institutional Investor Voting Behaviour

2021 ◽  
pp. 227-262
Author(s):  
Luca Enriques ◽  
Alessandro Romano
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Geographical Proximity ◽  
Voting Behaviour ◽  
Current Policy ◽  
Policy Issues ◽  
Common Ownership ◽  
Asset Managers ◽  
Shed Light

This chapter shows how network theory can improve our understanding of institutional investors’ voting behaviour and, more generally, their role in corporate governance. The standard idea is that institutional investors compete against each other on relative performance and hence might not cast informed votes, due to rational apathy and rational reticence. In other words, institutional investors have incentives to free-ride instead of ‘cooperating’ and casting informed votes. We show that connections of various kinds among institutional investors, whether from formal networks, geographical proximity, or common ownership, and among institutional investors and other agents, such as proxy advisors, contribute to shaping institutional investors’ incentives to vote ‘actively’. They also create intricate competition dynamics: competition takes place not only among institutional investors (and their asset managers) but also at the level of their employees and among ‘cliques’ of institutional investors. Employees, who strive for better jobs, are motivated to obtain more information on portfolio companies than may be strictly justified from their employer institution’s perspective, and to circulate it within their network. Cliques of institutional investors compete against each other. Because there are good reasons to believe that cliques of cooperators outperform cliques of non-cooperators, the network-level competition might increase the incentives of institutional investors to collect information. These dynamics can enhance institutional investors’ engagement in portfolio companies and also shed light on some current policy issues such as the antitrust effects of common ownership and mandatory disclosures of institutional investors’ voting.

scholarly journals Corporate governance and corporate investment: an exploratory research in the Brazilian publicly traded companies listed in Bovespa

2011 ◽  
Vol 9 (1) ◽  
pp. 545-557
Author(s):  
Nádia Sousa ◽  
Flávia Zóboli Dalmácio
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Market Value ◽  
Institutional Investor ◽  
Capital Cost ◽  
Exploratory Research ◽  
Statistical Relation ◽  
Publicly Traded ◽  
Publicly Traded Companies ◽  
Governance Practices

This paper aims to study the influence of Corporate Governance practices in the institutional decision to invest. It was developed a Governance Index (iGov), a descending rank was prepared and a test was applied to check if the companies in the first 25% of this rank have the highest number of institutional investors among their biggest investors than the companies of the last 25%. For the validation of IGov it was tested if the companies with the best marks present highest Returns, lowest Capital Cost, highest Market Value, and highest Competiveness within the sector, lowest Beta, highest EVA® and lowest Share concentration. It has been proved that the best Corporate Governance practices do not have any statistical relation with the presence of more Institutional Investor.

Changes in ownership forms and role of institutional investors in governing public companies in Malaysia

2015 ◽  
Vol 11 (4) ◽  
pp. 455-475 ◽  
Author(s):  
Hairul Azlan Annuar
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Governance System ◽  
Public Companies ◽  
Content Type ◽  
Investment Companies ◽  
Corporate Governance System ◽  
Different Types

Purpose – The purpose of this paper is to ascertain whether different types of institutional investor in Malaysia are involved in the corporate governance of their investee companies, and, if yes, to what extent is the level of the involvement. Design/methodology/approach – A qualitative approach, consisting of a series of interviews with 18 senior investment managers of different types of institutional investor, was chosen. Findings – The findings suggest that lessons learnt from the fallout of the Asian crisis has made Malaysian institutional investors not only to be more prudent in managing their total funds and in making equities investment decisions, but has resulted in a more active participation in their “core” investee companies apart from merely discharging their voting rights. Interview analysis revealed that government-linked investment companies are championing the cause and could possibly affect the overall level of institutional investors’ involvement, which bode well for the future of the corporate governance system of the country. Research limitations/implications – Generalisations may be an issue when interviews are used as the method of inquiry. Also, the sample is not random, as access to many managers depended on recommendations. In addition, respondents were consciously selected to obtain different types of institutional investors that included government and non-government linked. Originality/value – There is a lack of work on studying the involvement of institutional investors in developing countries, whereby previous work and literature review were predominantly based upon the experience of Western economies.

scholarly journals Can Institutional Investor Clique Play a Governance Role? Based on the Perspective of Insider Reduction

2021 ◽  
Vol 235 ◽  
pp. 01066
Author(s):  
Yuxiang Peng ◽  
Bingxiang Li
Keyword(s):  
Corporate Governance ◽  
Social Network ◽  
Institutional Investors ◽  
Significant Positive Correlation ◽  
Institutional Investor ◽  
Financial Industry ◽  
Interactive Behavior ◽  
The Social ◽  
Role Based ◽  
Grouping Behavior

This article takes China’s A-share non-financial industry listed companies from 2007 to 2015 as a sample, starting from the social network algorithm, to study whether the grouping behavior of institutional investors in the network can affect the degree of executive reduction in the future. The study found that there is a significant positive correlation between the shareholding ratio of institutional investors in group holdings and the degree of future reduction of executives. This article explores the interactive behavior of Chinese institutional investors in the network, and expands the research of institutional investors on corporate governance and executives’ future reduction behaviors.

scholarly journals Informed Trading in Business Groups

2018 ◽  
Vol 34 (2) ◽  
pp. 351-370 ◽  
Author(s):  
Alvaro Pedraza
Keyword(s):  
Private Information ◽  
Institutional Investors ◽  
Business Groups ◽  
Group Affiliation ◽  
Common Ownership ◽  
Timing Ability ◽  
Access Information ◽  
Disclosure Rules ◽  
The Difference ◽  
Asset Managers

Abstract Business groups, which are collections of legally independent companies with a significant amount of common ownership, dominate private sector activity in developing countries. This paper studies information flows within these groups by examining the trading performance of institutional investors in firms that belong to the same group. Using a novel dataset with complete transaction records in Colombia, this paper estimates the difference in returns between trades of asset managers in group-affiliated companies and trades of non-affiliated managers in the same stocks during the same period. The data show that affiliated managers display superior timing ability and that their trades outperform those of non-affiliated managers by 0.85 percent per month. The evidence suggests that institutional investors with group affiliation access information that is only available to members of the group. In order to limit the use of private information, financial authorities might need to expand their disclosure rules to monitor the trades of group-affiliated investors.

scholarly journals Corporate governance in Italy after the 1998 reform: What role for institutional investors?

2005 ◽  
Vol 2 (4) ◽  
pp. 11-31 ◽  
Author(s):  
Marcello Bianchi ◽  
Luca Enriques
Keyword(s):  
Corporate Governance ◽  
Empirical Analysis ◽  
Mutual Fund ◽  
Institutional Investors ◽  
Conflicts Of Interest ◽  
Institutional Investor ◽  
Active Role ◽  
Listed Companies ◽  
Legal Environment ◽  
Investor Activism

his paper tries to answer two questions: first, whether the changes in the law resulting from the 1998 reform are able to positively affect the attitude to activism of institutional investors in Italy; and second, whether, legal rules aside, it is reasonable to expect significant institutional investor activism in Italy. We provide both an empirical analysis of the factors affecting institutional investor activism in Italy and a legal analysis of the most relevant changes in the Italian mutual funds and corporate laws, following the 1998 reform. The empirical analysis shows that institutional shareholdings and investment strategies are compatible with the hypothesis that institutional investors can play a significant role in the corporate governance of Italian listed companies. However, a curb to their playing such an active role may derive from the predominance of mutual fund management companies belonging to banking groups (giving rise to conflicts of interest) and from the prevailing ownership structure of listed companies, which are still dominated by controlling shareholders holding stakes higher than, or close to, the majority of the capital (implying a weaker bargaining power of institutions vis-à-vis controllers). The analysis of the legal changes prompted by the 1998 financial markets and corporate law reform indicates that the legal environment is now definitely more favorable to institutional investor activism than before. However, the Italian legal environment proves still to be little favorable to institutional investor activism, when compared to that of the U.S. or the U.K.

The evolution and alignment of institutional shareholder engagement through the King and CRISA reports

2020 ◽  
Vol 11 (2) ◽  
pp. 147-153
Author(s):  
Richard Foster
Keyword(s):  
South Africa ◽  
Corporate Governance ◽  
Institutional Investors ◽  
Shareholder Activism ◽  
Institutional Investor ◽  
Historical Narrative ◽  
Content Type ◽  
Shareholder Engagement ◽  
On The Road ◽  
High Level

Purpose The purpose of this study is to provide a high-level review of the evolution of shareholder activism and institutional investor engagement in the corporate governance ecosystem in South Africa. Furthermore, it specifically seeks to explain the incorporation of such aspects into the various key codes and reports on corporate governance in South Africa since 1994. Design/methodology/approach Historical narrative and analysis. Findings This study highlights how shareholder activism and institutional investor engagement in the corporate governance ecosystem have been considered and addressed in South Africa since the publication of the First King Report in 1994. The progress that has been made specifically with regard to the introduction of a code for institutional investors is highlighted. The study ultimately acknowledges that this evolution is a continuing journey on the road to stakeholder inclusivity and engagement, and then concludes that the specific role and impact of institutional investors, particularly given some of the recent corporate governance failures, will require further consideration going forward. This should ensure the continued alignment of all stakeholders and assist in making the necessary improvements to the overarching governance framework and attendant culture. Originality/value This study is a part of a special issue that looks at the contribution of the King reports to governance globally.

Monitoring the Monitor: Distracted Institutional Investors and Board Governance

2020 ◽  
Vol 33 (10) ◽  
pp. 4489-4531 ◽  
Author(s):  
Claire Liu ◽  
Angie Low ◽  
Ronald W Masulis ◽  
Le Zhang
Keyword(s):  
Corporate Governance ◽  
Adverse Effects ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Shareholder Wealth ◽  
Independent Directors ◽  
Board Governance ◽  
Exogenous Shocks ◽  
Board Performance

Abstract Boards are crucial to shareholder wealth. Yet little is known about how shareholder oversight affects director incentives. Using exogenous shocks to institutional investor portfolios, we find that institutional investor distraction weakens board oversight. Distracted institutions are less likely to discipline ineffective directors with negative votes. Consequently, independent directors face weaker monitoring incentives and exhibit poor board performance; ineffective independent directors are also more frequently appointed. Moreover, we find that the adverse effects of investor distraction on various corporate governance outcomes are stronger among firms with problematic directors. Our findings suggest that institutional investor monitoring creates important director incentives to monitor.

Governance by Institutional Investors in a Stakeholder World

2015 ◽  
Author(s):  
Gerard Hertig
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Pension Funds ◽  
Societal Impact ◽  
Investment Strategies ◽  
Stakeholder Interests

This chapter examines the increased attention paid to stakeholder interests and its economic or, at least, societal impact, and whether giving a new or stronger voice to stakeholders is justified. It first provides an overview of recent stakeholder-oriented reforms and their impact before assessing the merits of giving stakeholders a new or reinforced voice in terms of corporate governance. It then turns to the hypothesis of having institutional investors act as stakeholder representatives as well as the extent to which their ultimate beneficiaries can contribute to institutional investor governance. It also explores whether the ultimate beneficiaries of pension funds can have the option to choose between shareholder and stakeholder-oriented investment strategies.

The Cold War and After

2012 ◽  
Author(s):  
Marc Trachtenberg
Keyword(s):  
Cold War ◽  
International System ◽  
Theoretical Perspective ◽  
Historical Analysis ◽  
Policy Issues ◽  
Nuclear Strategy ◽  
Book Deal ◽  
The Cold War ◽  
Historical Issues ◽  
Shed Light

What makes for war or for a stable international system? Are there general principles that should govern foreign policy? This book explores how historical work can throw light on these questions. The essays in this book deal with specific problems—with such matters as nuclear strategy and U.S.–European relations. But the book's main goal is to show how in practice a certain type of scholarly work can be done. The book demonstrates how, in studying international politics, the conceptual and empirical sides of the analysis can be made to connect with each other, and how historical, theoretical, and even policy issues can be tied together in an intellectually respectable way. These essays address a wide variety of topics, from theoretical and policy issues, such as the question of preventive war and the problem of international order, to more historical subjects—for example, American policy on Eastern Europe in 1945 and Franco-American relations during the Nixon–Pompidou period. But in each case, the aim is to show how a theoretical perspective can be brought to bear on the analysis of historical issues, and how historical analysis can shed light on basic conceptual problems.

Sign in / Sign up

Export Citation Format

Share Document