Conflict of interest and proxy voting by institutional investors

Ying Duan, Yawen Jiao and Kinsun Tam

Journal of Corporate Finance, 2021, vol. 70, issue C

Abstract: Political pressures can bias public pension funds (PPFs) toward activist shareholders. The pension business ties mutual fund families (MFFs) have with portfolio firms can bias them toward firm management. We examine how these contrasting conflicts of interest affect institutional investors' proxy voting behavior and show PPFs (MFFs) are considerably more supportive of activist shareholders (firm management) in voting, even if doing so may harm investment value. The biases are more pronounced when incentive conflicts are stronger. PPFs support shareholder (management) proposals more (less) when Democrats gain more power in the fund's home state. Conflicted PPFs are particularly active in supporting value reducing shareholder proposals.

Keywords: Conflict of interest; Public pension funds; Institutional investors; Proxy voting (search for similar items in EconPapers)
JEL-codes: G23 G34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:70:y:2021:i:c:s092911992100211x

DOI: 10.1016/j.jcorpfin.2021.102089

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