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Corporate Governance and Institutional Investors: Why are They Important?

Author

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  • Kokotec, Ivana Djundjek

    (University of Zagreb, Faculty of Organization and Informatics, Pavlinska 2, Varaždin, Croatia)

Abstract

The goal of this paper is to analyze the involvement of institutional investors in the corporate governance of companies in their portfolio by analyzing characteristics of institutional investors concerning the type of investment, investment time horizon, and degree of involvement in the process of managing a company. Starting from the deductive approach, the method of description, compilation, and classification is applied in this review paper, which describes and groups the previous theoretical and empirical research. Main findings indicate that institutional investors are involved in the corporate governance of their portfolio companies and that control mechanisms they use include voting rights at general assembly meetings, direct communication with the management to discuss strategies for future development, and collaboration with other institutional investors in the ownership structure. The theoretical contribution of this paper is an extensive, critical, and systematic review of existing theoretical and empirical findings from the domain dealing with the impact of institutional investors on the corporate governance of companies, and identifying key future opportunities to advance knowledge in this field.

Suggested Citation

  • Kokotec, Ivana Djundjek, 2022. "Corporate Governance and Institutional Investors: Why are They Important?," Journal of Economic and Social Development, Clinical Journals Press, vol. 9(01), pages 01-09, March.
    • Handle: RePEc:ris:joeasd:0055
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    References listed on IDEAS

    as
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    2. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, April.
    3. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(3), pages 377-397, September.
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    More about this item

    Keywords

    Corporate Governance; Corporate Governance Mechanisms; Institutional Investors;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists

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