Institutional investors: Active ownership through nomination committees

Parabolic Effect Between Managerial Ownership And Firm Value To Control Agency Conflict

“…(How et al, 2014) mentioned that the strict control conducted by institutional investor heavily depends on the amount of invesment. (Birkmose and Strand, 2013) also revealed that institutional ownership replaces managerial ownership in controlling the agency cost. The greater the ownership by financial institutions can make the institutions stronger in votes and motivation to supervise the management and as the consequence, there will be higher motivation to optimize value of the firm, thus will increase the firm's performance.…”

Large investors’ portfolio composition and firms value

“…Several papers suggest that the non-CEO/chair and non-family investors with large ownership stakes, such as institutional investors, have the incentive and ability to put pressure on management (e.g., Gillan and Starks, 2003) as well as to provide active monitoring (Ferreira and Matos, 2008). In the Swedish setting, institutional investors may engage with the nomination committee and collaborate both with controlling shareholders and with other institutional investors (Nachemson-Ekwall and Mayer, 2018) -almost all listed firms have one or often two domestic institutional investors sitting on the nomination committee (Birkmose and Strand, 2013). An institutional investor, the head of equity investing at a life insurance company, illustrates our findings and explains why their portfolio is heavily weighted in domestic stocks and how this matters: "We believe in home bias.…”