Articlegreen2014

Are Mutual Funds Active Voters?

410 citations0/0 files storedReview of Financial Studies

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Corporate Finance and Governance Financial Markets and Investment Strategies Political Influence and Corporate Strategies

Abstract

Mutual funds vary greatly in their reliance on proxy advisory recommendations. Over 25% of funds rely almost entirely on ISS recommendations, while other funds place little weight on them. Funds with higher benefits and lower costs of researching items up for vote are less likely to rely on ISS. These actively voting funds are less likely vote in a 'one size fits all' manner and they earn higher alphas, consistent with benefits from this allocation of resources. For the underlying firms, the presence of actively voting funds mitigates the influence of ISS and helps sway shareholder votes toward value-maximizing outcomes.

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References

1993Common risk factors in the returns on stocks and bonds 1997On Persistence in Mutual Fund Performance 1960The Application of Electronic Computers to Factor Analysis 2003Corporate Governance and Equity Prices 2007Boards: Does one size fit all☆2010The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey 2002Differences of Opinion and the Cross Section of Stock Returns 2000Mutual Fund Performance: An Empirical Decomposition into Stock‐Picking Talent, Style, Transactions Costs, and Expenses

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