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Delegated activism and disclosure

Dasgupta, Amil and Zachariadis, Konstantinos (2011) Delegated activism and disclosure. The Paul Woolley Centre paper series, 27. London School of Economics and Political Science, London, UK. ISBN 09568549689

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Abstract

Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use their proxy votes in a promanagement manner in order to garner lucrative pensions administration contracts, thus hindering shareholder value. Such concerns led the SEC to mandate the disclosure of mutual fund proxy votes starting in 2003. We present a simple model of mutual fund proxy voting in the presence of potential business ties. Our model generates clean predictions on how funds would vote both prior and subsequent to mandatory disclosure. We provide theoretical foundation for the limited activism of mutual funds and demonstrate that mandatory disclosure is not a panacea. We also show that the strategic interaction between multiple mutual fund blockholders of comparable size can generate counterintuitive non-monotone relationships with relevant empirical implications.

Item Type: Monograph (Working Paper)
Official URL: http://www2.lse.ac.uk/fmg/researchProgrammes/paulW...
Additional Information: © 2011 The Paul Woolley Centre, London School of Economics and Political Science
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Journal of Economic Literature Classification System: G - Financial Economics > G0 - General > G00 - General
Sets: Departments > Finance
Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 27
Date Deposited: 16 Apr 2012 08:59
URL: http://eprints.lse.ac.uk/43078/

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