- board of directors •
- shareholder activism •
- institutional investors •
- Board monitoring •
- Shareholder voting •
- Corporate governance
Boards are crucial to shareholder wealth. Yet, little is known about how shareholder
oversight affects director incentives. Using exogenous industry shocks to institutional investor portfolios, we find that institutional investor distraction weakens board oversight.
more frequently appointed. Such firms exhibit more earnings management, high unexplained CEO pay, and lower valuation. Our findings suggest that institutional investor monitoring creates important director incentives to monitor.