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Institutional Investors as Owners: Who Are They and What Do They Do?

Author

Listed:
  • Serdar Çelik

    (OECD)

  • Mats Isaksson

    (OECD)

Abstract

This paper provides a framework for analysing the character and degree of ownership engagement by institutional investors. It argues that the general term “institutional investor” in itself doesn’t say very much about the quality or degree of ownership engagement. It is therefore an evasive “shorthand” for policy discussions about ownership engagement. The reason is that there are large differences in ownership engagement between different categories of institutional investors. There are also differences in ownership engagement within the same category of institutional investors such as hedge funds, investment funds, etc. These differences arise from the fact that the degree of ownership engagement is determined by a number of different features and choices that together make up the institutional investor’s “business model”. When ownership engagement is not a central part of the business model, public policies and voluntary standards aiming to improve the quality of ownership engagement among institutional investors are likely to have limited effect. Based on an empirical overview of the relative size of different categories of institutional investors, the paper identifies a set of 7 features and 19 choices that in different combinations define the institutional investor’s business model. These features and choices are then used to establish a taxonomy for identifying different degrees of ownership engagement ranging from “no engagement” to “inside engagement”.

Suggested Citation

  • Serdar Çelik & Mats Isaksson, 2013. "Institutional Investors as Owners: Who Are They and What Do They Do?," OECD Corporate Governance Working Papers 11, OECD Publishing.
  • Handle: RePEc:oec:dafaae:11-en
    DOI: 10.1787/5k3v1dvmfk42-en
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    File URL: https://doi.org/10.1787/5k3v1dvmfk42-en
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    Cited by:

    1. Lemma, Tesfaye T. & Negash, Minga & Mlilo, Mthokozisi & Lulseged, Ayalew, 2018. "Institutional ownership, product market competition, and earnings management: Some evidence from international data," Journal of Business Research, Elsevier, vol. 90(C), pages 151-163.

    More about this item

    Keywords

    corporate governance; incentives; institutional investors; shareholder activism; shareholder engagement;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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