Do Institutional Investors Monitor their Large-Scale vs. Small-Scale Investments Differently? Evidence from the Say-On-Pay Vote
49 Pages Posted: 17 Oct 2014 Last revised: 13 Sep 2019
Date Written: September 11, 2019
Prior studies argue that investors will particularly monitor management for their large portfolio-weight and large fraction-of-company investments. However, we find that institutional investors are more likely to oppose management on the “Say-On-Pay” executive compensation vote for small portfolio-weight and fraction-of-company investments. We observe this pattern most strongly when the scale of the investment is measured at the institution level, but also when it is measured at the fund level. Our findings demonstrate that, when a low-cost monitoring opportunity is available, small positions that aggregate to a large level of ownership across institutions can play a meaningful role in corporate governance.
Keywords: shareholder's votes, say-on-pay, financial institutions, small shareholders
JEL Classification: G30
Suggested Citation: Suggested Citation