This thesis analyses several aspects of institutional investor influence in the corporate governance of UK firms. Chapter 1 introduces the thesis, and Chapter 2 provides a literature survey. The main original empirical research findings are presented in Chapters 3 to 5.Chapter 3 explores the key firm characteristics related to institutional investors. We show that institutional shareholdings, particularly those institutions with a large shareholding, are positively related to the proportion of outside directors on the board; with stock returns and with volatility. Institutional shareholdings are negatively related to the shareholdings of inside directors and firm size. Interestingly institutional shareholdings are positively related to CEO age but negatively related to the number of CEO’s years in office. This seems contradictory but it is consistent with institutional investors wanting experienced CEOs but not those individuals who have become entrenched. None of the measures proxying for the Cadbury recommendations for board structure, such as number or proportion of non-executive directors, CEO duality, or outside chair, has a significant relationship with institutional shareholdings. Chapter 4 analyses the relationship between institutional shareholdings and CEO cash-based remuneration. Uniquely to this field of research we also consider the different elements of remuneration separately to account for the timing differences relating to their award and performance criteria. First, we find that the presence of a large institutional shareholding, or high concentration of institutional shareholdings, does significantly reduce the magnitudes of salary and bonuses but they do not reduce the magnitude of benefits. However, the presence of an institutional investor, regardless of the size of their shareholding, has no relationship with the magnitude of any of the remuneration variables. Second, we find that institutional shareholdings significantly increases the positive relationship between bonus remuneration and firm performance, but that they do not have such a noticeable effect on the relationship between salary and benefits and firm performance. Third, we find that the presence of a large institutional shareholding, or high concentration of institutional shareholdings, reduces the rates of increase in salary, benefits and bonuses. Fourth, we find that the past practice of modelling salary and bonuses together can produce misleading results. We suggest that salary and bonuses should be modelled separately because they are payments for different reasons and relate to different periods of firm performance. Chapter 5 explores the influence that institutional investors have over CEO turnover. We show that the likelihood of a CEO being forced from office is negative and significantly related to firm performance and positive and significantly related to the presence of a large institutional shareholding or high concentration of institutional shareholdings. The findings in this thesis are robust to variations in research design. The conclusions are that the internal control mechanisms do work, that institutional investors are not the ‘passive’ investors often portrayed by some practitioners and early academic research and that institutional investors go to some lengths to ensure that their investee firms are properly governed.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:508906 |
| Date | January 2006 |
| Creators | Strivens, Mike |
| Publisher | University of Manchester |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://www.manchester.ac.uk/escholar/uk-ac-man-scw:161607 |
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