Small business need-to-know and of-interest. My read of this article concludes that although there is definitely weight on the side of a business for local investors….the bigger gain for local is from the investor side. What do you think?
Excerpt………Our key conjecture is that in an economic setting where monitoring costs vary inversely with distance, firms with high local institutional ownership would have better governance characteristics. In particular, firms with more proximate shareholders would exhibit a lower propensity to engage in undesirable corporate behavior like option backdating or aggressive earnings management. As a result of better monitoring, firms with high local institutional ownership would have a lower propensity to be a target of class action lawsuits. Further, because of geographical proximity, local institutions are more likely to attend shareholder meetings and introduce shareholder proposals, facilitate CEO turnover, or limit excess CEO pay. This form of local activism could also have an indirect influence on the selection of board members and the structure of compensation contracts
Read full article…….via Local Investors and Corporate Governance — The Harvard Law School Forum on Corporate Governance and Financial Regulation.
