Capital gains lock-in and governance choices

Stephen Dimmock, William Gerken, Zoran Ivković and Scott Weisbenner

Journal of Financial Economics, 2018, vol. 127, issue 1, 113-135

Abstract: Differences in accrued gains and investors’ tax-sensitivity induce variation in a capital gains lock-in effect across mutual funds even for the same stock at the same time. Exploiting this variation, we show this effect influences funds’ governance decisions: higher capital gains decrease the likelihood a fund exits prior to contentious votes and increase the likelihood a fund votes against management. Consistent with tax motivation, these findings are concentrated among funds with tax-sensitive investors. Further, high aggregate capital gains across funds holding a stock predict a higher likelihood management loses a vote and a lower likelihood a contentious vote is proposed.

Keywords: Mutual fund; Proxy voting; Corporate governance; Capital-gains tax; Lock-in effect (search for similar items in EconPapers)
JEL-codes: G23 G34 H20 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Capital Gains Lock-In and Governance Choices (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:127:y:2018:i:1:p:113-135

DOI: 10.1016/j.jfineco.2017.11.001

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