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

62 Pages Posted: 24 Jan 2018 Last revised: 26 Jul 2018

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: July 9, 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 (July 9, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 541/2017, Available at SSRN: https://ssrn.com/abstract=3096745 or http://dx.doi.org/10.2139/ssrn.3096745

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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