Awakening Giants? The Politically Contested Modification of Institutional Investors

Corporate Governance DOI: 10.1108/CG-08-2015-0111

22 Pages Posted: 27 Oct 2017 Last revised: 1 Jul 2018

See all articles by Markus Kallifatides

Markus Kallifatides

Stockholm School of Economics

Sophie Nachemson-Ekwall

Stockholm School of Economics

Date Written: November 23, 2015

Abstract

Purpose – The purpose of this paper is to offer a political perspective on modifications in corporate governance regulation. In the wake of the financial crisis, the investment rationale of institutional investors is being pushed away from a focus on financial market liquidity and short-term trading. From a political perspective, this modification entails consideration both of investment horizon and of the definition of corporate value.

Design/methodology/approach – The paper narrates the historical policy debate on institutional investors as corporate governors. Building on this point, a conceptual framework is developed to further the understanding of the current shifts in policy debate of institutional investors as governors.

Findings – The authors find a strong policy impetus to move away from certain liberal market assumptions of efficient financial markets and the positive effects of privatization, toward viewing markets as institutionally embedded. Based on their knowledge of corporate governance regimes’ political economy, the authors argue that this shift brings intensified engagement of institutional investors in corporate affairs. The reasons for why and how this might be politically contested are specified. In conclusion, propositions regarding the outcome of such contestation in different national corporate governance regimes are offered.

Originality/value – Pointing to the predominantly European stakeholder value versus shareholder value discussion, the authors claim that the corporate governance policy debate related to intensified engagement of institutional investors in corporate affairs is still in its infancy. Their political perspective, including propositions for further elaboration, offers a contribution to further academic debate.

Keywords: Regulation, Corporate governance, Institutional investors, Stakeholder value

Suggested Citation

Kallifatides, Markus and Nachemson-Ekwall, Sophie, Awakening Giants? The Politically Contested Modification of Institutional Investors (November 23, 2015). Corporate Governance DOI: 10.1108/CG-08-2015-0111. Available at SSRN: https://ssrn.com/abstract=3058908

Markus Kallifatides (Contact Author)

Stockholm School of Economics ( email )

PO BOX 6501
Stockholm, 11383
Sweden

Sophie Nachemson-Ekwall

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

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