Voting Choice

Andrey Malenko and Nadya Malenko

No 18397, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Traditionally, fund managers cast votes on behalf of fund investors. Recently, there is a shift towards "pass-through voting," with fund managers offering their investors a choice: delegate their votes to the fund or vote themselves. We develop a theory of delegation of voting rights to study the implications of such voting choice. If investors have heterogeneous preferences, voting choice may decrease investor welfare because investors retain voting rights excessively, prioritizing their preferences over information. If investors have heterogeneous information, voting choice generally improves investor welfare. However, it may decrease fund managers' information collection effort, resulting in less informed voting outcomes.

Keywords: Voting; Delegation; Index funds; Externalities; pass-through voting; ESG; Preference aggregation; Information aggregation (search for similar items in EconPapers)
JEL-codes: D72 (search for similar items in EconPapers)
Date: 2023-08
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Working Paper: Voting Choice (2023)
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