Institutional Investors, Corporate Ownership, and Corporate Governance: Global Perspectives

Institutional investors, Corporate ownership, Corporate governance

Estimation risk and incentive contracts for portfolio managers

Includes bibliographical references (p. 30)

Institutional Investors and Executive Compensation

Due to institutional investors' increasing ownership and interest in corporate governance, we hypothesize that the presence of institutional investors is associated with certain executive compensation structures. We find a significantly negative relation between the level of compensation and the concentration of institutional ownership, suggesting that institutions serve a monitoring role in the shareholder-manager agency problem. We further find a significantly positive relation between the pay-for-performance sensitivity of executive compensation and both the level and concentration of institutional ownership. These results suggest that the institutions act as a complement rather than a substitute to incentive compensation in mitigating the agency problem

The importance of climate risks for institutional investors

According to our survey about climate risk perceptions, institutional investors believe climate risks have financial implications for their portfolio firms and that these risks, particularly regulatory risks, already have begun to materialize. Many of the investors, especially the long-term, larger, and ESG-oriented ones, consider risk management and engagement, rather than divestment, to be the better approach for addressing climate risks. Although surveyed investors believe that some equity valuations do not fully reflect climate risks, their perceived overvaluations are not large

ESG shareholder engagement and downside risk

We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the risk reductions (measured using value at risk [VaR] and lower partial moments) vary across engagement types and success rates. Engagement is most effective in lowering downside risk when addressing environmental topics (primarily climate change). Further, targets with large downside risk reductions exhibit a decrease in environmental incidents after the engagement. We estimate that the VaR of engagement targets decreases by 9 percent of the standard deviation after successful engagements, relative to control firms

ESG Shareholder Engagement and Downside Risk

We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the risk reductions (measured using value at risk and lower partial moments) vary across engagement types and success rates. Engagement is most effective in lowering downside risk when addressing environmental topics (primarily climate change). Further, targets with large downside risk reductions exhibit a decrease in environmental incidents after the engagement. We estimate that the value at risk of engagement targets decreases by 9% of the standard deviation after successful engagements, relative to control firms

Conflicts of Interest in Sell-side Research and The Moderating Role of Institutional Investors

Because sell-side analysts are dependent on institutional investors for performance ratings and trading commissions, we argue that analysts are less likely to succumb to investment banking or brokerage pressure in stocks highly visible to institutional investors. Examining a comprehensive sample of analyst recommendations over the 1994-2000 period, we find that analysts’ recommendations relative to consensus are positively associated with investment banking relationships and brokerage pressure, but negatively associated with the presence of institutional investor owners. The presence of institutional investors is also associated with more accurate earnings forecasts and more timely re-ratings following severe share price falls

New Insights into Fluoroquinolone Resistance in Mycobacterium tuberculosis: Functional Genetic Analysis of gyrA and gyrB Mutations

Fluoroquinolone antibiotics are among the most potent second-line drugs used for treatment of multidrug-resistant tuberculosis (MDR TB), and resistance to this class of antibiotics is one criterion for defining extensively drug resistant tuberculosis (XDR TB). Fluoroquinolone resistance in Mycobacterium tuberculosis has been associated with modification of the quinolone resistance determining region (QRDR) of gyrA. Recent studies suggest that amino acid substitutions in gyrB may also play a crucial role in resistance, but functional genetic studies of these mutations in M. tuberculosis are lacking. In this study, we examined twenty six mutations in gyrase genes gyrA (seven) and gyrB (nineteen) to determine the clinical relevance and role of these mutations in fluoroquinolone resistance. Transductants or clinical isolates harboring T80A, T80A+A90G, A90G, G247S and A384V gyrA mutations were susceptible to all fluoroquinolones tested. The A74S mutation conferred low-level resistance to moxifloxacin but susceptibility to ciprofloxacin, levofloxacin and ofloxacin, and the A74S+D94G double mutation conferred cross resistance to all the fluoroquinolones tested. Functional genetic analysis and structural modeling of gyrB suggest that M330I, V340L, R485C, D500A, D533A, A543T, A543V and T546M mutations are not sufficient to confer resistance as determined by agar proportion. Only three mutations, N538D, E540V and R485C+T539N, conferred resistance to all four fluoroquinolones in at least one genetic background. The D500H and D500N mutations conferred resistance only to levofloxacin and ofloxacin while N538K and E540D consistently conferred resistance to moxifloxacin only. Transductants and clinical isolates harboring T539N, T539P or N538T+T546M mutations exhibited low-level resistance to moxifloxacin only but not consistently. These findings indicate that certain mutations in gyrB confer fluoroquinolone resistance, but the level and pattern of resistance varies among the different mutations. The results from this study provide support for the inclusion of the QRDR of gyrB in molecular assays used to detect fluoroquinolone resistance in M. tuberculosis

Genetic Testing to Inform Epilepsy Treatment Management From an International Study of Clinical Practice

IMPORTANCE: It is currently unknown how often and in which ways a genetic diagnosis given to a patient with epilepsy is associated with clinical management and outcomes. OBJECTIVE: To evaluate how genetic diagnoses in patients with epilepsy are associated with clinical management and outcomes. DESIGN, SETTING, AND PARTICIPANTS: This was a retrospective cross-sectional study of patients referred for multigene panel testing between March 18, 2016, and August 3, 2020, with outcomes reported between May and November 2020. The study setting included a commercial genetic testing laboratory and multicenter clinical practices. Patients with epilepsy, regardless of sociodemographic features, who received a pathogenic/likely pathogenic (P/LP) variant were included in the study. Case report forms were completed by all health care professionals. EXPOSURES: Genetic test results. MAIN OUTCOMES AND MEASURES: Clinical management changes after a genetic diagnosis (ie, 1 P/LP variant in autosomal dominant and X-linked diseases; 2 P/LP variants in autosomal recessive diseases) and subsequent patient outcomes as reported by health care professionals on case report forms. RESULTS: Among 418 patients, median (IQR) age at the time of testing was 4 (1-10) years, with an age range of 0 to 52 years, and 53.8% (n = 225) were female individuals. The mean (SD) time from a genetic test order to case report form completion was 595 (368) days (range, 27-1673 days). A genetic diagnosis was associated with changes in clinical management for 208 patients (49.8%) and usually (81.7% of the time) within 3 months of receiving the result. The most common clinical management changes were the addition of a new medication (78 [21.7%]), the initiation of medication (51 [14.2%]), the referral of a patient to a specialist (48 [13.4%]), vigilance for subclinical or extraneurological disease features (46 [12.8%]), and the cessation of a medication (42 [11.7%]). Among 167 patients with follow-up clinical information available (mean [SD] time, 584 [365] days), 125 (74.9%) reported positive outcomes, 108 (64.7%) reported reduction or elimination of seizures, 37 (22.2%) had decreases in the severity of other clinical signs, and 11 (6.6%) had reduced medication adverse effects. A few patients reported worsening of outcomes, including a decline in their condition (20 [12.0%]), increased seizure frequency (6 [3.6%]), and adverse medication effects (3 [1.8%]). No clinical management changes were reported for 178 patients (42.6%). CONCLUSIONS AND RELEVANCE: Results of this cross-sectional study suggest that genetic testing of individuals with epilepsy may be materially associated with clinical decision-making and improved patient outcomes

ESG and Downside Risks: Implications for Pension Funds

Due to their long-term horizons, pension funds face enhanced exposures to the long-lived effects of many ESG risks. Moreover, given the potential consequences of being underfunded, pension funds are particularly exposed to ESG-related downside risks, especially those related to climate change. We discuss the implications of these risks and provide evidence on institutional investors’ perspectives on climate-related downside risks and how these risks are priced in financial markets. We also document how institutional investors address climate risks in the investment process, with a focus on the role of engagement versus divestment