The Role of Institutional Investors in Corporate Governance An Empirical Study

There is potential for institutional investors to improve their role in corporate governance. In order to increase their influence institutional investors need to be prepared to pursue an escalation strategy. However, such an approach also needs a strong long-term commitment and investment perspective as well as an attitude that considers the long-term interests of the company.

Institutional investors have a high level of expertise that can contribute to the widely discussed improvement of the competence and independence of boards. Important prerequisites of institutional investors who wish to play a role in corporate governance are no conflict of interest and sufficient sector expertise.

The managerial implications are that the investor relations function is well established. Communication is the most appropriate measure. However, other typical and presumably more powerful measures like use of voting rights, engagement in the AGM, regular contact with the members of the supervisory board, taking a seat on the supervisory board, owning a meaningful company stake and collaboration with other shareholders play a minor role.

Petra Nix is a lecturer in Financial Communications on the program for Advanced Studies in Corporate Communication at FHNW (University of Applied Sciences of Northwestern Switzerland) in Olten, Switzerland. Prior to this she completed her studies in Business Administration, received her MBA from the University of Rochester and her doctorate in Business Administration from the University of Surrey. She has also completed various post-graduate courses at LBS, IMD and the University of St. Gallen. Petra began her professional career in executive assistant and research functions in various companies in the banking industry, utility and pharmaceutical business. She lead Investor Relations and Financial Communications at Wella AG and VIAG (now: E.ON AG). Following this she became Senior Vice President of Bank Vontobel, Zurich. In 2001 she became Member of the Management Board of Kirchhoff Consult Germany and Managing Director of the Swiss subsidiary. In 2009 she did a MBO of the Swiss subsidiary, which she owns and currently runs. Petra has published many articles for professional journals and has conducted various research studies.
 

Jean Jinghan Chen is a Chair Professor of Financial Management at Surrey Business School, UK. Prior to this she obtained a PhD in Economics from Lancaster University. Her research interests cover a wide range of topics in the area of financial economics and financial management, in particular, corporate finance and corporate governance, where she has published widely in books and leading academic journals, such as Corporate Governance: An International Review, European Accounting Review, European Financial Management, Journal of Business Research, International Review of Finance and Journal of Contemporary Accounting and Economics. She serves on the editorial board for the academic journals Corporate Governance: An International Review and Journal of Accounting Studies - A Publication of the Accounting Society of China, and is an associate editor of Nankai Business Review International. She is also a regular reviewer for 6 major international academic journals in financial and economic studies and has delivered international conference plenary/keynote speeches and seminars on topics related to corporate governance, participating in advisory and review bodies.