Ownership and Voting Authority: Institutional Investors and Proxy Voting 

Abstract

Institutional ownership is widely used to assess corporate governance influence, yet voting rights are often delegated through adviser-client relationships. We study how reported institutional ownership translates into realized voting by institutions and construct a measure of voting utilization, defined as the fraction of reported ownership that is actually voted by the institution. Voting utilization varies substantially across institutions and firms and is strongly related to advisers’ stated proxy voting arrangements. Reported holdings of the largest institutional blockholders overstate the voting control they actually exercise, implying that effective voting power is more diffuse than ownership shares alone would suggest. Overall, the evidence shows that the governance consequences of institutional ownership depend not only on who holds shares, but also on how voting authority is contractually allocated and exercised.

Keywords: Institutional Investors, Proxy Voting, Corporate Governance

JEL Classification: G23, G28, G34