Do Institutional Investors Monitor their Large vs. Small Investments Differently? Evidence from the Say-On-Pay Vote

56 Pages Posted: 17 Oct 2014 Last revised: 15 Oct 2018

See all articles by Miriam Schwartz-Ziv

Miriam Schwartz-Ziv

Michigan State University - Department of Finance

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 15, 2018

Abstract

Widely-cited theoretical models predict that large shareholders will monitor management, while small shareholders will free-ride. However, we find that institutional investors are particularly likely to oppose management on Say-On-Pay for their small-scale shareholdings; the presence of a large blockholder further catalyzes their opposition. We also find that the scale of investment at the institutional level predicts voting patterns better than the scale of investment at the fund level. Overall, 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

Schwartz-Ziv, Miriam and Wermers, Russell R., Do Institutional Investors Monitor their Large vs. Small Investments Differently? Evidence from the Say-On-Pay Vote (October 15, 2018). Robert H. Smith School Research Paper No. RHS 2510442; 13th Annual Mid-Atlantic Research Conference in Finance (MARC) Paper. Available at SSRN: https://ssrn.com/abstract=2510442 or http://dx.doi.org/10.2139/ssrn.2510442

Miriam Schwartz-Ziv (Contact Author)

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI MICHIGAN 48824-1122
United States
8573127793 (Phone)
8573127793 (Fax)

HOME PAGE: http://miriamschwartzziv.wix.com/mysite

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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