Do Institutional Investors Monitor their Large-Scale vs. Small-Scale Investments Differently? Evidence from the Say-On-Pay Vote

Do Institutional Investors Monitor their Large-Scale vs. Small-Scale Investments Differently? Evidence from the Say-On-Pay Vote

Miriam Schwartz-Ziv, Russ Wermers

Series number :

Serial Number: 
541/2017

Date posted :

January 29 2018

Last revised :

December 28 2021
SSRN Share

Keywords

  • shareholder’s votes • 
  • Say-on-Pay • 
  • Financial institutions • 
  • small shareholders

We examine the relation between an institution’s stock ownership and its tendency to support corporate management through the “Say-on-Pay” (SOP) executive compensation vote.

Institutional advisors are more likely to oppose management on the SOP vote for their small-scale investments, i.e., investments that comprise a small fraction of an institution’s aggregate stockholdings across its funds, or, alternatively, investments that comprise a small fraction of the total equity market capitalization of a corporation. We find evidence indicating that this voting pattern reflects an institutions’ overall sentiment for the stock, and is particularly prevalent when institutions have limited attention to monitor their investments.

Authors

Real name:
Research Member
University of Maryland, Robert H. Smith School of Business