Question

In the modern era, who are the largest shareholders in many major companies?

• A. Individual investors
• B. Public financial institutions and mutual funds
• C. Foreign corporations
• D. Government agencies

Answer 1

Answer:

B. Public financial institutions and mutual funds

In the modern era, the largest shareholders in many major companies are public financial institutions and mutual funds. These are not individuals, but rather huge organizations that manage money on behalf of millions of investors. This phenomenon is a result of the growth of institutional investing, where collective pools of money have replaced individual investors as the dominant force in the stock market.

Public Financial Institutions

Public financial institutions, such as government-owned banks, pension funds, and sovereign wealth funds, often hold large stakes in companies. Their purpose is to manage money for a wide range of public interests, like providing retirement benefits for civil servants or managing a nation's reserve funds. Their holdings are typically long-term investments, making them stable shareholders. A prominent example is the Life Insurance Corporation of India (LIC), which holds significant stakes in many publicly listed Indian companies.

Mutual Funds

Mutual funds are investment vehicles that pool money from many individual investors to buy a diverse portfolio of stocks, bonds, or other securities. Major mutual fund companies like The Vanguard Group and BlackRock are among the largest shareholders in the world. When you invest in a mutual fund, you're essentially buying a small part of a vast, professionally managed portfolio. This gives these firms immense voting power and influence over the companies they invest in, as they are representing the collective interests of millions of small investors