Barriers to effective corporate governance by institutional investors: Implications for theory and practice

Parthiban David and Rahul Kochhar

European Management Journal, 1996, vol. 14, issue 5, 457-466

Abstract: With their increasing equity ownership, institutional investors have been hailed as a possible solution to governance problems with the ability to reduce the power of managers. However, there are some barriers that decrease their effectiveness in providing such governance. These include barriers arising from: a) business relationships of investors with firms in which they invest, in which they invest, b) extensive government regulations that constrain the activities of these investors, and c) limitations on their ability to process the information required to monitor firms. This paper examines these barriers to corporate governance faced by institutional investors, and presents some implications for research and practice.

Date: 1996
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