Activist investment: institutional investor monitoring of portfolio companies

Abstract

Purpose

The purpose of the paper is to show what Asset managers undertake to operate in accordance with the Statement of Institutional Shareholders' Committee (ISC) whenever they engage with portfolio companies on behalf of their institutional investor clients. The Statement (2002) states that institutional shareholders have a responsibility to make considered use of their votes, and to enter into a dialogue with companies based on the mutual understanding of objectives.

Design/methodology/approach

A survey study of Asset managers was conducted to evaluate their adherence to the ISC Principles.

Findings

The findings in the paper show that fund managers routinely analyse information concerning those companies in which they invest, and have meetings with company managers. Managers are also involved in activities to promote standards of corporate governance and corporate accountability. It is also found that managers' experience in managing deal flows, funds' specialization and engagement specialists are the key drivers of adherence to the ISC Principles.

Originality/value

The paper highlights the importance of specific fund capabilities for monitoring and controlling portfolio companies.

Citation

Martin, R. and Nisar, T.M. (2007), "Activist investment: institutional investor monitoring of portfolio companies", Management Decision, Vol. 45 No. 5, pp. 827-840. https://doi.org/10.1108/00251740710753657