Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, May 18, 2008

Black on Empirical Evidence of Institutional Investor Monitoring

The Value of Institutional Investor Monitoring: The Empirical Evidence, by BERNARD S. BLACK, University of Texas at Austin School of Law; McCombs School of Business, University of Texas at Austin; European Corporate Governance Institute (ECGI), was recently posted on SSRN.  Here is the abstract:

This Article collects the available evidence as of 1992 on the potential value of institutional investor monitoring of large U.S. public companies. The evidence is suggestive rather than conclusive. There are a number of systematic shortfalls in the functioning of large public firms. Institutions could potentially address some of these shortfalls. The institutions are best able to address issues that are common to a number of companies, and less able to respond to company specific failures. Large institutions do little monitoring, but there is some evidence that other large outside shareholders can engage in valuable monitoring, and little evidence that greater shareholder oversight is harmful. Monitoring by financial institutions in Germany, Japan, and Great Britain appears to have significant benefits

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