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http://ssrn.com/abstract=1860144
 
 

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Europe's Corporate Governance Green Paper: Do Institutional Investors Matter?


Christoph Van der Elst


Tilburg Law School; Ghent University-Universiteit Gent - Department of Business Law

Erik P. M. Vermeulen


Tilburg University - Department of Business Law; Philips International BV; Tilburg Law and Economics Center (TILEC); Kyushu University - Faculty of Law

June 8, 2011

Tilburg Law School Research Paper No. 014/2011
Lex Research Topics in Corporate Law & Economics Working Paper No. 2/2011

Abstract:     
The European Commission launched a Green Paper on corporate governance aimed largely at listed companies in April 2011. The Green Paper recognizes that institutional investors play a dominant role in the current financial markets, but it criticizes the short-term thinking and practice among these investors. Long-term and appropriate shareholder engagement is viewed as the linchpin of an effective corporate governance framework. The question arises, however, if institutional investors should be actively engaged if they lack the time, knowledge, and a financial incentive to do so. We introduce and briefly discuss “shareholder engagement costs” that policymakers should take into account when increasing shareholders’ rights and betting on institutional investors to protect companies against business failures. The engagement costs considered here are: (1) conventionalism/micro-management, (2) management distraction, (3) risk aversion and (4) lack of transparency.

Number of Pages in PDF File: 19

Keywords: institutional investors, corporate governance, shareholder activism, shareholder rights, European Commission, Corporate Governance Green Paper

JEL Classification: K22

working papers series


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Date posted: June 9, 2011 ; Last revised: June 13, 2014

Suggested Citation

Van der Elst, Christoph and Vermeulen, Erik P. M., Europe's Corporate Governance Green Paper: Do Institutional Investors Matter? (June 8, 2011). Tilburg Law School Research Paper No. 014/2011; Lex Research Topics in Corporate Law & Economics Working Paper No. 2/2011. Available at SSRN: http://ssrn.com/abstract=1860144 or http://dx.doi.org/10.2139/ssrn.1860144

Contact Information

Christoph Van der Elst
Tilburg Law School ( email )
Tilburg, 5000 LE
Netherlands
Ghent University-Universiteit Gent - Department of Business Law ( email )
Universiteitstraat 4
Gent, B-9000
Belgium
Erik P.M. Vermeulen (Contact Author)
Tilburg University - Department of Business Law ( email )
Philips International BV ( email )
Amstelplein 2
Amsterdam, Noord-Holland 1070 MX
Netherlands
Tilburg Law and Economics Center (TILEC)
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Kyushu University - Faculty of Law ( email )
6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan
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