Institutional investors do in fact make a difference as lead plaintiffs in reaching larger settlements and improving corporate governance. A forthcoming paper to be published in the Journal of Financial Economics, entitled Institutional Monitoring through Shareholder Litigation,concludes that relative to securities fraud class actions with an individual lead plaintiff, lawsuits with an institutional lead plaintiff are less likely to be dismissed, have significantly larger settlements and are associated with more board independence after the lawsuit.The paper, which can be found here, is written by professors from four different universities: C.S. Agnes Cheng of Louisiana State University, Henry Huang of Prairie View A&M University, Yinghua Li of Purdue University, and Gerald J. Lobo of the University of Houston. As stated by the authors in a Harvard blog, here, the paper was motivated by the lack of evidence on the effectiveness of institutional investors exercising their monitoring power through litigation: Such evidence is much needed because the Private Securities Litigation Reform Act of 1995 (PSLRA) established a preference of granting lead plaintiff status to plaintiffs with the largest financial stake in the class action, thus providing institutions an opportunity to critically affect the litigation by serving as the lead plaintiffs. Given the costs of serving as a lead plaintiff and the free rider problem, institutional investors may not want to lead class action lawsuits even if they hold the largest financial stake in the defendant firm. Consequently, it is important to provide empirical evidence on the effectiveness of institutional monitoring through class action litigation. In addition to documenting the implications of the lead plaintiff provision in the PSLRA Act, our findings also underscore the important monitoring role of institutions, from both an immediate disciplining of management as well as a long-term corporate governance perspective. The authors hypothesized that generally an institutional investor will be a "free-rider" and take the benefits of class actions led by other individual plaintiffs, unless the potential benefits to them outweighed their agency costs. The study, as described by the authors, used a sample of 1,811 securities class actions filed between 1996 and 2005, and confirmed that hypothesis.Thus the study found that: The authors then sought to control forthese determinants to find our whether, even then, their was a difference in litigation outcomes when institutions became involved. Using multivariate regression analysis to control for these determinants of when institutions are likely to get involved, the authors concluded: These findings should be reason enough for institutional investors to step forward and serve as lead plaintiffs. So institutions, get involved!