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

See all articles by Miriam Schwartz-Ziv

Miriam Schwartz-Ziv

Hebrew University of Jerusalem - Department of Finance and Banking; 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: September 11, 2019

Abstract

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

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 (September 11, 2019). 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

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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