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Ties that bind: how business connections affect mutual fund activism

Cvijanović, Dragana, Dasgupta, Amil and Zachariadis, Konstantinos (2016) Ties that bind: how business connections affect mutual fund activism. Journal of Finance, 71 (6). pp. 2933-2966. ISSN 0022-1082

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Identification Number: 10.1111/jofi.12425

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.

Item Type: Article
Official URL: http://www.afajof.org/details/landingpage/2866131/...
Additional Information: © 2016 American Finance Association
Divisions: Finance
Subjects: H Social Sciences > HB Economic Theory
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
Sets: Departments > Finance
Date Deposited: 06 Apr 2016 13:31
Last Modified: 20 Oct 2019 02:23
Funders: Rollie and Mary Windley Tillman Endowment Fund, UNC Chapel Hill Wells Fargo Center for Corporate Finance, LSE Paul Woolley Centre, LSE Department of Finance, Cambridge University Endowment for Research in Finance, Cambridge University Faculty of Economics
URI: http://eprints.lse.ac.uk/id/eprint/65929

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