Delegated activism and disclosure

Amil Dasgupta and Konstantinos Zachariadis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use their proxy votes in a promanagement manner in order to garner lucrative pensions administration contracts, thus hindering shareholder value. Such concerns led the SEC to mandate the disclosure of mutual fund proxy votes starting in 2003. We present a simple model of mutual fund proxy voting in the presence of potential business ties. Our model generates clean predictions on how funds would vote both prior and subsequent to mandatory disclosure. We provide theoretical foundation for the limited activism of mutual funds and demonstrate that mandatory disclosure is not a panacea. We also show that the strategic interaction between multiple mutual fund blockholders of comparable size can generate counterintuitive non-monotone relationships with relevant empirical implications.

JEL-codes: G00 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-07-01
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http://eprints.lse.ac.uk/43078/ Open access version. (application/pdf)

Related works:
Working Paper: Delegated Activism and Disclosure (2011)
Working Paper: Delegated Activism and Disclosure (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:43078

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