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Institutional Investor Monitoring and the Structure of Corporate Boards


Gavin Smith


University of New South Wales - School of Banking and Finance

Peter L. Swan


University of New South Wales (UNSW); Financial Research Network (FIRN)

David R. Gallagher


Centre for International Finance and Regulation; The University of New South Wales - Australian School of Business; Macquarie Graduate School of Management
October 2, 2007


Abstract:     
This study examines the effect of institutional investor influence on the structure of corporate boards. We focus on investor influences with respect to reducing board size and increasing board independence. Measures of institutional influence are negatively related to board size and positively related to board independence. To achieve these aims, institutions remove inside directors. This effect is enhanced when the firm has performed poorly - institutions take corrective action to improve firm performance by punishing those directors deemed responsible for contributing to poor firm performance. Institutional investors do not adjust their monitoring objectives with respect to board size and independence to reflect firm specific characteristics.

Number of Pages in PDF File: 67

Keywords: Board of Directors, Monitoring, Institutional Investment Behavior

JEL Classification: G23, G32, J33

working papers series


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Date posted: March 20, 2008  

Suggested Citation

Smith, Gavin, Swan, Peter L. and Gallagher, David R., Institutional Investor Monitoring and the Structure of Corporate Boards (October 2, 2007). Available at SSRN: http://ssrn.com/abstract=939441 or http://dx.doi.org/10.2139/ssrn.939441

Contact Information

Gavin Smith (Contact Author)
University of New South Wales - School of Banking and Finance ( email )
Sydney, NSW 2052
Australia
Peter Lawrence Swan
University of New South Wales (UNSW) ( email )
School of Banking and Finance
Australian School of Business UNSW
Sydney NSW, 2052
Australia
+61 2 9385 5871 (Phone)
+61 2 9385 6347 (Fax)
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

David R. Gallagher
Centre for International Finance and Regulation ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia
HOME PAGE: http://www.cifr.edu.au
The University of New South Wales - Australian School of Business ( email )
Sydney, NSW 2052
Australia
HOME PAGE: http://www.cifr.edu.au

Macquarie Graduate School of Management ( email )
MGSM
99 Talavera Road
North Ryde, NSW 2109
Australia
HOME PAGE: http://www.mgsm.edu.au
Feedback to SSRN (Beta)


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