The Role of Institutional Investors in Corporate Governance An Empir
What role do independent institutional investors play in the corporate governance of listed German companies? The authors provide insight into an empirical and qualitative research study, exploring the importance of communication and the role, independenc
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Abstract This dissertation is concerned with the role of Institutional Investors in corporate governance. Statistical material on ownership of equity show that over the last decades the shareholdings of Institutional Investors have grown dramatically. The Institutional Investors are indeed a diverse group, however many of them have similar strategies in terms of long-term investments and can be analysed together. Corporate governance can be defined as the system of rights, structures and control mechanisms established internally and externally over the management of a company, with the objective of protecting the interests of the various stakeholders in the company. The Berle & Means problem of abuse of power by management is identified, and based on material mainly from America, Institutional Investors as active monitors of their portfolio companies are analysed in terms of forms of activism, benefits of activism and problems arising from such activism. It is concluded that an adoption in Europe of a more active role of Institutional Investors would in fact be desirable as a supplement or alternative to other control mechanisms, if a solutions as to how to monitor the institutions themselves is found. In the second part of the dissertation it is analysed whether this more active role of Institutional Investors is in fact likely to take place in Europe. United Kingdom and Germany have been chosen as representatives of two different European share markets. Issues covered include impediments to equity finance, constraints on ownership of shares, information disclosure, voting rights, insider trading, proxy voting, board construction and litigation. It is concluded that the two share markets in question are converging, however that reform is needed in both countries if the Institutional Investors are to gain a more active role in corporate governance.
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Table of Content
Abstract ............................................................................................................. p. 2 Table of content .................................................................................................... 3 Introduction .......................................................................................................... 6 Part I: Corporate Governance and Institutional Investors 1. Defining “corporate governance” ................................................................... 8 1.1 Corporate .............................................................................................. 8 1.2 Governance........................................................................................... 9 1.3 Definition............................................................................................ 10 2. Interest conflicts and control mechanisms ................................................... 10 2.1 Interest conflicts – the “Berle & Means” problem ............................. 10 2.1.1 Small shareholders .............................................................. 11 2.1.2 “V
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