Behind the scenes: the corporate governance preferences of institutional investors

Institutional investors are the dominant force in financial markets today, yet their preferences about corporate governance are generally undisclosed and their activities in this area tend to be performed privately. We conduct a survey to elicit their views on investor protection and corporate governance mechanisms. We find that among the institutions who responded to our survey corporate governance is of importance to their investment decisions and a number of them are willing to engage in shareholder activism. Further, an examination of the institutional investors’ portfolio holdings shows that their investment decisions appear to be related to their preferences.