Institutional Investors: The Way to Active Ownership

30 Pages Posted: 24 Sep 2012 Last revised: 4 Feb 2013

See all articles by Hanne S. Birkmose

Hanne S. Birkmose

University of Southern Denmark

Therese Strand

Copenhagen Business School, Center for Corporate Governance

Date Written: September 24, 2012


Manuscript Type: Empirical

Research Question/Issue: Institutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership strategies. This study investigates the prerequisites for – and potential dissimilarities in the practice of, active ownership among institutional investors in two Scandinavian countries with diminutive legal and cultural distance in general.

Research Findings/Insights: Using data on shareholder proposals from Danish and Swedish annual general meetings from 2006 throughout 2010, we find that institutional investors are approximately a thousand times more active in Sweden than in Denmark. Joint legal and cultural traditions trigger the development of alternative explanations. We study the influence of a local governance mechanism - the shareholder-based nomination committee employed in Sweden, as a potential explanation. This is relevant, as such a setup transfers power from the board to the owners. Presumably, this reduces the impact of free rider and collective action problems, and increases the shareholders’ inclination to make proposals, which is also what we find.

Theoretical/Academic Implications: We contribute to literature by investigating the importance of local governance mechanisms – an area where research is scarce. The paper discusses how two classical theoretical dilemmas – free rider problems and collective action problems among shareholders, can be reduced by the implementation of local corporate governance elements.

Practitioner/Policy Implications: Regulators should be aware of the impact by local governance mechanisms, and how shareholders react under different legal and practical prerequisites. The paper also highlights legal elements that differ between Denmark and Sweden, and which might affect institutional activism.

Keywords: Corporate governance, shareholder activism, institutional investors

JEL Classification: K22

Suggested Citation

Birkmose, Hanne Søndergaard and Strand, Therese, Institutional Investors: The Way to Active Ownership (September 24, 2012). Nordic & European Company Law Working Paper No. 10-30, Available at SSRN: or

Hanne Søndergaard Birkmose (Contact Author)

University of Southern Denmark ( email )

Campusvej 55
Odense, 5230
+4526901410 (Phone)

Therese Strand

Copenhagen Business School, Center for Corporate Governance ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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