Are better governed funds better monitors?

Julia Chou, Lilian Ng and Qinghai Wang

Journal of Corporate Finance, 2011, vol. 17, issue 5, 1254-1271

Abstract: Using Morningstar mutual fund stewardship grade data, we find that the governance mechanisms of mutual funds play a key role in their monitoring of portfolio firms and in their investment decisions. Mutual funds with better governance practices tend to vote responsibly on corporate governance proposals of their portfolio firms and also provide better return performance. Furthermore, these funds tend to avoid investing in poorly governed firms. The results suggest that funds with quality governance are more likely to act in the interest of their investors, and that costs associated with funds' monitoring of their portfolio firms do not adversely affect their return performance.

Keywords: Proxy voting; Corporate governance; Mutual funds (search for similar items in EconPapers)
JEL-codes: G11 G23 G34 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:17:y:2011:i:5:p:1254-1271

DOI: 10.1016/j.jcorpfin.2011.06.008

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