Institutional Ownership Overstates Voting Power: The Allocation of Voting Authority

Institutional ownership is commonly used to assess corporate governance influence, yet voting rights are often allocated through adviser-client relationships. We study how reported ownership translates into realized voting by reporting institutions and construct voting utilization, the fraction of reported ownership voted by the institution. Even among institutions that vote, the average institution votes 77 percent of its reported shares, and utilization varies substantially across institutions and firms. Advisers' stated allocation of voting authority strongly predicts which institutions vote. The largest institutional blockholders’ reported holdings overstate their realized voting control, implying that voting power is more diffuse than ownership suggests.