does the composition of a strongcompanystrong’s shareholder base really.pdfVIP

S T A N F O R D C L O S E R L O O K S E R I E S Topics, Issues, and Controversies in Corporate Governance and Leadership DOES THE COMPOSITION OF A COMPANY’S SHAREHOLDER BASE REALLY MATTER? By anne Beyer, david f. larcker, and Brian tayan July 31, 2014 THE INFLUENCE OF SHAREHOLDERS percent) and focus on cost reduction (51 percent). Shareholders are not a homogenous group. They A majority (57 percent) believes that a company include a diverse mix of institutional and retail in- whose shareholder base is dominated by short-term vestors that differ in terms of investment horizon investors will have reduced market growth and/or (long-term versus short-term), objectives (purely reduced long-term growth (see Exhibit 1). Some economic versus social objectives), level of activity prominent investor groups, too, share these con- (active versus passive), portfolio concentration, and cerns (see Exhibit 2). size. There is little rigorous research, however, that Most corporations dedicate significant time and conclusively demonstrates the impact that indi- attention to managing their shareholder base. A re- vidual investor groups have on corporate deci- cent survey by the National Investor Relations In- sion making or that quantifies the premium (or stitute (NIRI) and the Rock Center for Corporate discount) that specific shareholder groups add to Governance at Stanford University finds that 91 corporate value. For example, one set of studies percent of companies discuss shareholder composi- examines whether blockholders (shareholders th