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Instittional Investors

In: Business and Management

Submitted By desseray940
Words 443
Pages 2
Institutional investors are important in today’s business world because they have such a great influence on the cash flow surrounding all businesses. In a quick example to explain their importance, consider your 401k plan. I would much rather have my money trusted with an institutional investor than an individual investor, or worse, myself. That is a disaster waiting to happen. Institutional investors do this all day, every day. There is always hype from certain people concerning this profession, but I believe it’s mostly due to their lack of knowledge in the manner. It’s not fair to criticize something that you don’t completely understand.
Institutional investors hold a high advantage when it comes to moving around the architecture of corporate policy. Reason being is because they hold a high ownership of stock (Varma, 2001). Owning this high amount of stock gives them the upper hand. They are capable of voting power, and much more. They also hold somewhat of a position of superiority when it comes to attaining information. This is an additional way that they are of great importance to the business world. They are able to actively oversee and supervise a company’s managers (Varma, 2001). I almost like to view this as a discreet check and balance process for firms.
Lastly, one of the most important aspects of the institutional investor’s position is to ensure good business ethics. This brings back the comment I made earlier about the checks and balances process. Institutional investors are obligated to hold a responsibility of their own. Their job has the ability to affect thousands or hundreds of thousands of individuals who have trusted their money with them. It is up to them that they see to it that firms uphold good ethics (Block, Hirt, & Danielsen, 2011). If they were not to hold up to this standard then the consequences would be devastating. Institutional investors also have the power to possibly replace ill mannered boards of directors (Block et al., 2011). It’s a position that is undoubtedly a high stress position. The responsibilities that need to be upheld are large in number. Fortunately, I can imagine that it can be a very rewarding job on a good day. Personally, I wouldn’t want to see what a bad day looks like for them.

Block, S. B., Hirt, G. A., & Danielsen, B. R. (2011). Foundations of financial management (14th ed.). New York, NY: McGraw-Hill Irwin. (e-book links found in Lessons)
Varma, R. (2001). The role of institutional investors in equity financing and corporate monitoring. The Journal of Business and Economic Studies, 7(1), 39-53. Retrieved from

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