Question

Why are institutional investors important in today’s business world?

Short answer

Institutional investors are important as a single investor provides huge funds to the company, instead of several small investors.

Step-by-step solution

Meaning of institutional investors

Institutional investor is an organization that makes investments in a company on behalf of its clients. These investors pool together the funds of various investors and then invest those funds in a company.

Importance of institutional investors

Institutional investors are important because:

1. These investors provide a huge pool of funds to the company and own a large percentage of the company.
2. These investors have more votes thanthe small investors, and can vote large blocks of the shares in electing the board.
3. These investors ensure that the company is performing profitably and ethically as they are responsible to their clients.