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
Date Written: June 8, 2020
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: Suggested Citation