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The Role of Institutional Investors in Corporate Governance of Their Portfolio Companies – The Case of Croatia

Author

Listed:
  • Ivana Dundek Kokotec

    (Faculty of Organization and Informatics, University of Zagreb, Croatia)

  • Silvije Orsag

    (Faculty of Economics and Business, University of Zagreb, Croatia)

  • Marina Klacmer Calopa

    (Faculty of Organization and Informatics, University of Zagreb, Croatia)

Abstract

The goal of this research is to examine the involvement of institutional investors in the corporate governance of companies in their portfolio by analyzing characteristics of institutional investors with respect to the type of investment, investment time horizon, and degree of involvement in the process of managing a company. The paper will outline the attitudes of managers on the level of investors’ involvement in the governance process in order to identify determinants of investment decisions, decisions to take corrective actions to enhance corporate governance, or decisions to leave the ownership structure. A qualitative approach was chosen, consisting of a series of structural interviews with 25 fund managers of different types of institutional investors. The results indicate that institutional investors are involved in the corporate governance of their portfolio companies, and that control mechanisms they use include voting rights, direct communication with the management with the aim of discussing strategies for future development, and collaboration with other institutional investors in the ownership structure.

Suggested Citation

  • Ivana Dundek Kokotec & Silvije Orsag & Marina Klacmer Calopa, 2021. "The Role of Institutional Investors in Corporate Governance of Their Portfolio Companies – The Case of Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 23(2), pages 105-129, December.
    • Handle: RePEc:iez:survey:ces-v23_2-2021_dundek-kokotec-orsag-klacmer-calopa
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    References listed on IDEAS

    as
    1. Chris Mallin, 1999. "Financial Institutions and their Relations with Corporate Boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 7(3), pages 248-255, July.
    2. Vittas, Dimitri, 1998. "Institutional investors and securities markets : which comes first?," Policy Research Working Paper Series 2032, The World Bank.
    3. Chen, Xia & Harford, Jarrad & Li, Kai, 2007. "Monitoring: Which institutions matter?," Journal of Financial Economics, Elsevier, vol. 86(2), pages 279-305, November.
    4. repec:bla:jfinan:v:53:y:1998:i:1:p:65-98 is not listed on IDEAS
    5. Charlie Weir & David Laing & Phillip J. McKnight, 2002. "Internal and External Governance Mechanisms: Their Impact on the Performance of Large UK Public Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5&6), pages 579-611.
    6. Charlie Weir & David Laing & Phillip J. McKnight, 2002. "Internal and External Governance Mechanisms: Their Impact on the Performance of Large UK Public Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5‐6), pages 579-611.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    institutional investors; corporate governance; control mechanisms; portfolio investment style; conceptual analysis;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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