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Ties that bind: how business connections affect mutual fund activism

Dragana Cvijanovic, Amil Dasgupta and Konstantinos Zachariadis

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

Abstract: We investigate how business ties with portfolio firms influence mutual funds' proxy voting using a comprehensive dataset spanning 2003 to 2011. In sharp contrast to the prior literature, we show that the proxy voting of mutual funds is significantly influenced by their business ties with portfolio firms. Our result holds at the level of individual proposals after robustly controlling for unobserved heterogeneity across firms and fund families and over time as well as for the effects of ISS recommendations and fund family holdings. We also show that the influence of business ties on proxy voting is strongest for highly contested shareholder proposals where proxy votes are most relevant for firm value. Finally, we show that the prominent class action lawsuits of 2006 against 401(K) sponsors and providers had differential effects on the voting of different fund families depending on whether they were sued, thus unearthing a potential link between investor attention and corporate governance.

JEL-codes: D72 G23 G34 G38 K22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2014-04-01
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Downloads: (external link)
http://eprints.lse.ac.uk/119030/ Open access version. (application/pdf)

Related works:
Journal Article: Ties That Bind: How Business Connections Affect Mutual Fund Activism (2016) Downloads
Working Paper: Ties that bind: how business connections affect mutual fund activism (2016) Downloads
Working Paper: Ties that Bind:How business connections affect mutual fund activism (2014) Downloads
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