Importance of Institutional Ownership in Company Performance Institutional ownership or institutional investor is considered as a corporate monitor in many aspects related to the performance of the company. The institutional investor must monitor the way managers carry out their duties ensuring that they put the company's interests first rather than their own personal interest. This is because the manager who acts as an agent of the company is the one who is responsible for managing the business ensuring the stability of the company's performance. This includes examining the internal control that exists in the company. For example, to avoid fraud or misrepresentation of company data, the institutional investor must monitor the internal control system to be efficient and effective in providing best corporate governance practices in the company. Furthermore, the institutional investor had invested a large sum of money in the company and in return would get a benefit in terms of dividend which depends on the performance of the company during the year. According to Grossman and Hart, 1980, large shareholders may have more incentive to monitor managers than board members, who may have little or no wealth invested in the firm. These events occurred when large shareholders have the ability, materials, opportunity and can influence how the manager runs the company. Several researchers have put forward the hypothesis that corporate monitoring by institutional investors can push managers to focus on the best interests of corporate performance rather than opportunistic or selfish behavior. Furthermore, a function of the size of the holdings in the company may also have the ability to influence... middle of paper... types of mechanisms can be used to align the interests and objectives of the manager with those of the shareholders and prevent related problems to monitoring and control.1 ) Align the interests and objectives of the manager with those of the shareholder through the creation of an efficient management system. For example, executive compensation plans, pension plans, stock options and direct monitoring by boards of directors. 2) Strengthening of shareholder rights in terms of greater incentive and management monitoring capacity. These rights will bring justice and legal protection from unethical managers. For example, shareholders can punish a manager by losing their job or by reducing the manager's salary. 3) The last method is to use an indirect means of corporate control where the acquisition specialist must gain control of a company in order to replace poorly performing managers.