Ties that bind: how business connections affect mutual fund activism

Cvijanovic, Dragana, Dasgupta, Amil ORCID: 0000-0001-8474-9470 and Zachariadis, Konstantinos (2014) Ties that bind: how business connections affect mutual fund activism. Financial Markets Group Discussion Papers (731). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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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.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 2014 The Authors
Divisions:	Finance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation K - Law and Economics > K2 - Regulation and Business Law > K22 - Corporation and Securities Law
Date Deposited:	08 Jun 2023 23:04
Last Modified:	11 Dec 2024 19:46
URI:	http://eprints.lse.ac.uk/id/eprint/119030

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