Importance of Institutional Ownership in Company PerformanceInstitutional ownership or institutional investor is considered as a business monitor in many aspects related to company performance business. The institutional investor must monitor how managers carry out their duties, ensuring that they prioritize the best interests of the company over their own interests. In effect, the manager who acts as an agent of the company is the one who is responsible for operating the company and ensuring the stability of the company's performance. This includes examining the internal controls that exist in the company. For example, to avoid fraud or misrepresentation of company data, the institutional investor must monitor the internal control system to be effective and efficient in implementing best corporate governance practices within the company. Additionally, the institutional investor has invested a large amount of money in the company which in return will benefit from a 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 company. These events occur when large shareholders have the capacity, materials, opportunity and can influence how the manager manages the company. The hypothesis put forward by several researchers is that corporate monitoring by institutional investors can push managers to focus on the best interest of the company's performance rather than on opportunistic or selfish behavior. Furthermore, depending on 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 shareholders and prevent problems related to monitoring and control.1) Align the interests and objectives of the manager with those of the shareholder by implementing an effective management system. For example, executive compensation plans, pension plan, stock options and direct control by boards of directors.2) Strengthening shareholder rights in terms of increased incentive and control capacity over the direction. These rights will provide justice and legal protections against unethical managers. For example, shareholders can sanction a manager by losing his job or reducing his salary. 3) The last method is to use an indirect means of corporate control where the buyout specialist must acquire control of a company in order to displace poorly performing managers.