Both authors contributed equally to the article.
RESEARCH NOTES AND COMMENTARIES
Independent boards and the institutional investors that prefer them: Drivers of institutional investor heterogeneity in governance preferences
Article first published online: 14 AUG 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 35, Issue 10, pages 1552–1563, October 2014
How to Cite
Schnatterly, K. and Johnson, S. G. (2014), Independent boards and the institutional investors that prefer them: Drivers of institutional investor heterogeneity in governance preferences. Strat. Mgmt. J., 35: 1552–1563. doi: 10.1002/smj.2166
- Issue published online: 27 AUG 2014
- Article first published online: 14 AUG 2013
- Accepted manuscript online: 26 JUN 2013 01:16PM EST
- Manuscript Revised: 11 JUN 2013
- Manuscript Accepted: 11 JUN 2013
- Manuscript Received: 12 MAR 2009
- institutional investors;
- agency theory;
- institutional theory;
- institutional investor heterogeneity;
- socialization of agency theory
Institutional investors report that they prefer to invest in firms with greater board independence despite the fact that researchers have been unable to demonstrate a link between board independence and firm performance. We investigate whether differences among institutional investors affect these preferences. We find that trading strategies have some effect but that mutual funds—facing the strongest institutional pressures—have significantly stronger preferences for firms with greater board independence than do other types of institutional investors. This suggests that institutional investor preferences for independent boards are at least partially driven by institutional pressures rather than anticipated reductions in agency costs. Copyright © 2013 John Wiley & Sons, Ltd.