Institutional Investors and Corporate Governance

112 Pages Posted: 3 Sep 2020 Last revised: 3 Jun 2021

See all articles by Amil Dasgupta

Amil Dasgupta

London School of Economics (LSE); European Corporate Governance Institute (ECGI)

Vyacheslav Fos

Boston College - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Date Written: May 20, 2021

Abstract

We provide a comprehensive overview of the role of institutional investors in corporate governance with three main components. First, we establish new stylized facts documenting the evolution and importance of institutional ownership. Second, we provide a detailed characterization of key aspects of the legal and regulatory setting within which institutional investors govern portfolio firms. Third, we synthesize the evolving response of the recent theoretical and empirical academic literature in finance to the emergence of institutional investors in corporate governance. We highlight how the defining aspect of institutional investors – the fact that they are financial intermediaries – differentiates them in their governance role from standard principal blockholders. Further, not all institutional investors are identical, and we pay close attention to heterogeneity amongst institutional investors as blockholders.

Keywords: Institutional Investors, Corporate Governance, Exit, Voice, Shareholder Activism, Proxy Voting Advisors

JEL Classification: G11, G15, G22, G23

Suggested Citation

Dasgupta, Amil and Fos, Vyacheslav and Sautner, Zacharias, Institutional Investors and Corporate Governance (May 20, 2021). European Corporate Governance Institute – Finance Working Paper 700/2020, Available at SSRN: https://ssrn.com/abstract=3682800 or http://dx.doi.org/10.2139/ssrn.3682800

Amil Dasgupta (Contact Author)

London School of Economics (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7458 (Phone)
+44 20 7955 7420 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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

Vyacheslav Fos

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

European Corporate Governance Institute (ECGI) ( email )

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Zacharias Sautner

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

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

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