Norges Bank Investment Management has awarded three research grants to study the effects of increasing institutional ownership on companies.
The European Corporate Governance Institute (ECGI), the University of Oxford and the Ecole Polytechnique Federale de Lausanne (EPFL) have received grants worth in total 500,000 US dollars.
"During the last decades, ownership in companies have become more fragmented as institutional investors, like ourselves, have become significant shareholders owning a slice of thousands of companies across the globe. We would like to understand better how this may affect companies", says Chief Governance and Compliance Officer Carine Smith Ihenacho.
Given the number of companies their portfolio, institutional investors cannot know each company in in detail. Index-tracking strategies may also reduce investors' incentives to monitor individual companies. The awarded projects promise to shed more light on changes in ownership, their impact on companies and how institutional investors can influence corporate governance at scale.
The research projects
The European Corporate Governance Institute will, in collaboration with the University of Oxford, the Review of Corporate Finance Studies (RCFS) and the Review of Financial Studies (RFS), examine the unprecedented shock of the Covid-19 pandemic on global corporations by hosting an online workshop in 2021 and a physical conference in 2022 on ‘Corporations and Covid-19.’ The purpose of the project is to provide a forum for researchers to explore the immediate impact of Covid-19 on companies’ governance, decision-making and performance.
The University of Oxford has been awarded a three-years research grant to analyse how changes in ownership, compensation structure and communication from owners affect management behaviour. The project is led by Professor Martin Schmalz and will run laboratory experiments to assess which mechanisms are casually related to changes in managerial choices. The project will collaborate with researchers from the Norwegian School of Economics, the University of Cambridge, Yale School of Management, and the University of Cologne.
The École Polytechnique Fédérale de Lausanne will undertake a three years research project on institutional investor preferences and their impact on portfolio companies with respect to environmental, social, and governance issues. A central part of the project is to create a new dataset of institutional investors' guidelines on proxy voting. Professor Rüdiger Fahlenbrach will lead the project and collaborate with researchers from the Frankfurt School of Finance and Management and from the University of Zurich.
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