Institutional Investors and Corporate Governance

Institutional Investors and Corporate Governance

Amil Dasgupta, Vyacheslav Fos, Zacharias Sautner

Series number :

Serial Number: 
700/2020

Date posted :

September 22 2020

Last revised :

March 03 2021
SSRN Share

Keywords

  • institutional investors • 
  • Corporate governance • 
  • exit • 
  • voice • 
  • shareholder activism • 
  • Proxy Voting Advisors

We provide a comprehensive overview of the role of institutional investors in corporate governance with three main components. First, we provide a detailed characterization of key aspects of the legal and regulatory setting within which institutional investors govern portfolio firms.

Second, we establish new stylized facts documenting the evolution and importance of institutional ownership. Third, we synthesize the evolving “response” of the recent theoretical and empirical academic literature in finance to the emergence of institutional investors in corporate governance. We highlight how the defining aspect of institutional investors – the fact that they are financial intermediaries – differentiates them in their governance role from standard principal block-holders. Further, not all institutional investors are identical, and we pay close attention to heterogeneity amongst institutional investors as block-holders.

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