We provide a comprehensive overview of the role of institutional investors in
corporate governance with three main components. First, we establish new stylized
facts documenting the evolution and importance of institutional ownership.
Second, we provide a detailed characterization of key aspects of the legal and
We provide a comprehensive overview of the role of institutional investors in
corporate governance with three main components. First, we establish new stylized
facts documenting the evolution and importance of institutional ownership.
Second, we provide a detailed characterization of key aspects of the legal and
regulatory setting within which institutional investors govern portfolio firms. 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 blockholders. Further, not all institutional investors
are identical, and we pay close attention to heterogeneity amongst institutional
investors as blockholders.
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