Behind the scenes: the corporate governance preferences of institutional investors

Institutional investors are a 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 behind the scenes. We conduct a survey to elicit institutional investors’ views on investor protection and corporate governance. We find that among the institutions that respond to our survey, corporate governance is important to their investment decisions and the majority are willing to engage in shareholder activism. When we examine institutional investors’ portfolio holdings, we find that their investment decisions appear to be related to their revealed preferences.