Institutional Investor Power and Heterogeneity: Implications for Agency and Stakeholder Theories

Document Type

Article

Publication Date

1-1-2003

Abstract

This article examines the implications of the escalation in institutional inves power and heterogeneity for two dominant theories of corporate governanceagency theory and stakeholder theory. From this analysis, a new view of the agency relationship between institutional investors and their portfolio firms emerges, which recognizes the institutions’ market power, complex role as financial intermediaries, and possible involvement in simultaneous and opposing agency contracts. We also conclude that stakeholder theorists should reconsider these newly empowered shareholders’moral standing in relation to their portfolio firms, and they should reexamine the identities and goals of these modern investors. To that end, we demonstrate that a novel, intragroup application of Mitchell, Agle, and Wood’s stakeholder framework to heterogeneous institutional investors illuminates their varying levels of stakeholder salience. © 2003, Sage Publications. All rights reserved.

Identifier

84992827662 (Scopus)

Publication Title

Business Society

External Full Text Location

https://doi.org/10.1177/0007650303260450

ISSN

00076503

First Page

398

Last Page

429

Issue

4

Volume

42

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