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Ties that bind: how business connections affect mutual fund activism

Dragana Cvijanović, Amil Dasgupta and Konstantinos Zachariadis

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

Abstract: We investigate whether business ties with portfolio firms influence mutual funds’ proxy voting using a comprehensive data set spanning 2003 to 2011. In contrast to prior literature, we find that business ties significantly influence pro-management voting at the level of individual pairs of fund families and firms after controlling for ISS recommendations and holdings. The association is significant only for shareholder-sponsored proposals and stronger for those that pass or fail by relatively narrow margins. Our findings are consistent with a demand-driven model of biased voting in which company managers use existing business ties with funds to influence how they vote.

Keywords: mutual funds; activism; business ties; proxy vote disclosure (search for similar items in EconPapers)
JEL-codes: D72 G23 G34 G38 K22 (search for similar items in EconPapers)
Date: 2016-11-10
New Economics Papers: this item is included in nep-cdm
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Citations: View citations in EconPapers (32)

Published in Journal of Finance, 10, November, 2016, 71(6), pp. 2933-2966. ISSN: 0022-1082

Downloads: (external link)
http://eprints.lse.ac.uk/65929/ 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 (2014) Downloads
Working Paper: Ties that Bind:How business connections affect mutual fund activism (2014) Downloads
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