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Behind the Scenes: The Corporate Governance Preferences of Institutional Investors

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  • JOSEPH A. McCAHERY
  • ZACHARIAS SAUTNER
  • LAURA T. STARKS

Abstract

We survey institutional investors to better understand their role in the corporate governance of firms. Consistent with a number of theories, we document widespread behind‐the‐scenes intervention as well as governance‐motivated exit. These governance mechanisms are viewed as complementary devices, with intervention typically occurring prior to a potential exit. We further find that long‐term investors and investors that are less concerned about stock liquidity intervene more intensively. Finally, we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions.

Suggested Citation

  • JOSEPH A. McCAHERY & ZACHARIAS SAUTNER & LAURA T. STARKS, 2016. "Behind the Scenes: The Corporate Governance Preferences of Institutional Investors," Journal of Finance, American Finance Association, vol. 71(6), pages 2905-2932, December.
    • Handle: RePEc:bla:jfinan:v:71:y:2016:i:6:p:2905-2932
    DOI: 10.1111/jofi.12393
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