Institutional Investors as Minority Shareholders

Assaf Hamdani and Yishay Yafeh

Review of Finance, 2013, vol. 17, issue 2, 691-725

Abstract: We examine the link between minority shareholders' rights and corporate governance by studying institutional investors' voting patterns in a concentrated ownership environment. Institutions rarely vote against insider-sponsored proposals even when the law empowers the minority. Institutions vote against compensation-related proposals more often than against related party transactions even when minority shareholders cannot influence outcomes. Potentially conflicted institutions are more likely to vote for insiders' proposals than stand-alone investors, regardless of their effect on outcomes. A plausible conclusion is that empowering minority shareholders affects the selection of proposals but not actual voting; another is that empowering minority shareholders is ineffective without addressing conflicts of interest. Copyright 2013, Oxford University Press.

Date: 2013
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