Behind the Scenes: The Corporate Governance Preferences of Institutional Investors

We survey institutional investors to better understand their role in the corporate governance of firms. Consistent with a number of theories we document widespread behind-the-scenes intervention as well as governance-motivated exit. Both governance mechanisms are viewed as complementary devices, in which intervention typically will occur prior to a potential exit. We find that long-term investors and investors that are less concerned about stock liquidity intervene more intensively. Finally, most investors use proxy advisors and believe that their information improves their own voting decisions.