CORPORATE GOVERNANCE AND FIRM PERFORMANCE: EVIDENCE FROM INSTITUTIONAL INVESTORS AND PROXY VOTING IN KOREA

Abstract

This paper investigates the role of institutional investors as corporate monitors by analyzing the relationship between proxy voting decisions and firm performance in Korea. We find that institutional investors support more proposals when firm performance is strong. They are more likely to support the proposals when ownership of the blockholder and foreign investors are high. It suggests that institutional investors monitor firms through active voting on the proposals relating to performance. On the contrary, National Pension Service' affirmative voting decisions is negatively related to firm performance. Furthermore, we also find that institutional investors' voting is significantly related to the long-term performance and impact the pass of proposal and they more carefully monitor financially distressed firm.