Role of Institutional Investment Intermediaries in Corporate Control: A Critical Analysis

Abstract

Purpose: The study aims to critically analyse the role of institutional investment intermediaries in the corporate control of their investee companies in Anglo-Saxon jurisdictions.   Theoretical framework: Critical analysis of the role of institutional investment intermediaries derived out of the theoretical basis of classical theory of separation of ownership from management, agency theory, agency cost, stewardship theory and the modern corporate governance.   Method: This is theoretical research using the analogy of the different accepted theories of corporate law on corporate management and control into the underlying utility of emerging institutional investment intermediaries in corporate control.    Result and Conclusion: The result of the study shows major inferences that the suitable engagement in corporate control by institutional investment intermediaries is the stewardship relationship with its investee companies. However, their stewardship role can be converted to agency role to protect their private interests, which can also be resulted in the threat of corporate control monopolization as well as horizontal corporate control.   Research implications: The research indicates the need for prevention of stewardship relationship transposing to agency relationship for preventing corporate control monopolization as well as horizontal corporate control.   Originality/value: The current legal framework so far didn’t expect the possibility for transposition of stewardship relationship to agency relationship and its adverse impacts. Hence, corporate law and its allied laws shall take precautionary deterrence measures to avoid such transposition.