Question

Evaluate the extent to which the influence of institutional investors has grown in recent years and analyse the significance of the role they play in corporate governance.

Answer 1

Institutional investors include banks, Insurance companies, Hedge funds etc. They pool the funds and use this pooled funds for purchasing securities. Here they will arrange funds from different sources and this will invest into the portfolios. Here the pooled funds may invest in different portfolios so they make profit from there and they can use this earnings to payback their customers. The main advantage of this system is they can arrange large amount of money from others and this will helps them for make more earnings. They also have the accessability towards the corporate governance.

Inrecent days the institutional investors are very common and they become large part of the corporate governance. Corporate governance is the set of rules and laws which tells how the business have to operate and controlled. Now a days institutional investors are becomes the main part of the company and they are the part of making the common set of rules and procedures of the company. These much influence they made in thiese days. They will actively participate in the companies decisions making process. This is happend because of the portion of the share held by them in the companies. They usually buy large portion of the shares of the company and so they are enable for actively particpate in the companies internal affairs. They are very dominant market participants and their strategies and policies are different from one another. So as a dominant market player who held most of the stocks with their hands they have the right to participate and contribute their decisions for the corporate governance.

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