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

52 Pages Posted: 17 Oct 2014 Last revised: 8 Jun 2020

See all articles by Miriam Schwartz-Ziv

Miriam Schwartz-Ziv

Hebrew University of Jerusalem - Department of Finance and Banking; ECGI (European Corporate Governance Institute)

Russ Wermers

University of Maryland - Robert H. Smith School of Business; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: June 8, 2020

Abstract

This study examines the relation between the magnitude of an institution’s stock ownership and its tendency to support management through the “Say-On-Pay” (SOP) executive compensation vote. We find that an institutional investor is more likely to oppose management on the SOP vote for small-scale investments, i.e., when the investment consists of a small-portfolio weight of the institution’s overall portfolio, or when the fraction-of-company held by the institution is small. We find evidence indicating that this voting pattern is related to institutions having limited attention and limited capacity to monitor their small-scale stock positions through more costly methods.

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-Scale vs. Small-Scale Investments Differently? Evidence from the Say-On-Pay Vote (June 8, 2020). Robert H. Smith School Research Paper No. RHS 2510442, 13th Annual Mid-Atlantic Research Conference in Finance (MARC) Paper, 2018, Available at SSRN: https://ssrn.com/abstract=2510442 or http://dx.doi.org/10.2139/ssrn.2510442

Miriam Schwartz-Ziv (Contact Author)

Hebrew University of Jerusalem - Department of Finance and Banking ( email )

Mount Scopus
Jerusalem, 91905
Israel

ECGI (European Corporate Governance Institute) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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