Beyond Ownership: The Role of Institutional Investors in International Corporate Governance

Abstract

ABSTRACT Research Question/Issue This paper reviews key theories on the governance role of institutional investors, examines institutional ownership trends globally, and highlights recent research on their evolving impact on corporate governance. The paper also incorporates insights from select Special Issue articles dedicated to understanding the role of institutional investors worldwide. Research Findings/Insights We show that while most existing research focuses on the United States, recent evidence highlights significant global growth in institutional ownership. However, research examining the role of institutional investors outside the United States remains limited, despite some recent progress. Theoretical/Academic Implications Institutional investors are increasingly shaping global capital markets and corporate governance through growing ownership, increased shareholder activism, and rising passive investment strategies. We provide recommendations for relevant topics to guide future research, including the governance preferences of institutional investors (i.e., voice vs. exit) across different investor types and international settings, as well as the collective influence of multiple institutional investors on corporate governance practices and outcomes. Practitioner/Policy Implications There is a meaningful need for future studies to address the influence and effectiveness of institutional investors on corporate governance practices around the world. A better understanding of their role in different settings should improve their impact on corporations and, more broadly, on society. JEL Classification G32, G34

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