Norges Bank Investment Management (NBIM) announced it is handing out $500,000 (€421,000) to fund three corporate governance research projects, as it attempts to understand more about the effects of increasing institutional ownership on companies.
The manager of Norway’s NOK10.9trn (€1bn) sovereign wealth fund said company ownership had become more fragmented in the last few decades, with institutional investors – such as NBIM itself – now owning a slice of thousands of firms around the world.
Carine Smith Ihenacho, chief governance and compliance officer at NBIM, said: “We would like to understand better how this may affect companies.”
The central bank subsidiary, which manages the Government Pension Fund Global (GPFG), said it had awarded grants to the European Corporate Governance Institute (ECGI), the University of Oxford and to Switzerland’s Ecole Polytechnique Federale de Lausanne (EPFL).
NBIM said that given the number of companies in their portfolios, institutional investors could not know each firm in detail. “Index-tracking strategies may also reduce investors’ incentives to monitor individual companies,” the SWF manager said.
The research projects being funded promised to shed more light on changes in ownership and how they affected businesses, as well as how institutional investors could influence corporate governance at scale, it said.
Of the three projects, the University of Oxford has been awarded a three-year research grant to examine how changes in ownership, compensation structure and communication from owners affect management behaviour.
The work is to be led by Professor Martin Schmalz and will collaborate with researchers from the Norwegian School of Economics, the University of Cambridge, Yale School of Management, and the University of Cologne, according to NBIM.
In another project, working with the University of Oxford, the Review of Corporate Finance Studies and the Review of Financial Studies, Brussels-based ECGI is to examine the COVID-19 shock on companies around the world, NBIM said.
Meanwhile, EPFL is to undertake a three-year research project on institutional investor preferences and their impact on portfolio companies – focusing on environmental, social, and governance (ESG) issues, and aiming to create a new dataset of institutional investors’ guidelines on proxy voting, it said.