Are Mutual Funds Active Voters?

Peter Iliev and Michelle Lowry ()

The Review of Financial Studies, 2015, vol. 28, issue 2, 446-485

Abstract: Mutual funds vary greatly in their reliance on proxy advisory recommendations. Over 25% of funds rely almost entirely on Institutional Shareholder Services (ISS) recommendations, while other funds place little weight on them. Funds with higher benefits and lower costs of researching the items up for vote are less likely to rely on ISS. These actively voting funds are less likely to 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.

Date: 2015
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