The Value of Institutional Investor Monitoring: The Empirical Evidence

45 Pages Posted: 14 May 2008 Last revised: 6 Aug 2008

Date Written: 1992

Abstract

This Article collects the available evidence as of 1992 on the potential value of institutional investor monitoring of large U.S. public companies. The evidence is suggestive rather than conclusive. There are a number of systematic shortfalls in the functioning of large public firms. Institutions could potentially address some of these shortfalls. The institutions are best able to address issues that are common to a number of companies, and less able to respond to company specific failures. Large institutions do little monitoring, but there is some evidence that other large outside shareholders can engage in valuable monitoring, and little evidence that greater shareholder oversight is harmful. Monitoring by financial institutions in Germany, Japan, and Great Britain appears to have significant benefits.

In a companion paper, Agents Watching Agents: The Promise of Institutional Investor Voice, UCLA Law Review, vol. 39, pp. 811-893 (1992), http://ssrn.com/abstract=1132082, I survey the empirical evidence on the value of large shareholder oversight of managers.

Suggested Citation

Black, Bernard S., The Value of Institutional Investor Monitoring: The Empirical Evidence (1992). UCLA Law Review, Vol. 39, pp. 895-939, 1992. Available at SSRN: https://ssrn.com/abstract=1132063

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)

Brussels
Belgium

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