The Role of Mutual Funds in Corporate Governance: Evidence from Mutual Funds’ Proxy Voting and Trading Behavior
University of Alberta - Department of Finance and Statistical Analysis
University of California, Riverside
June 24, 2014
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
This paper examines mutual fund families’ proxy voting records to analyze their choices between voting against management (“voice”) and voting with their feet (“exit”). Even though proxy voting is particularly conducive to governance through voice rather than exit, we provide evidence that both exit and voice are important governance mechanisms when Institutional Shareholder Services recommends voting against management. Funds with smaller ownership blocks and shorter investment horizons are more likely to exit, and funds are more likely to exit small, liquid firms with greater insider ownership.
Number of Pages in PDF File: 47
Keywords: mutual funds, proxy voting, exit, governance
JEL Classification: G23, G34
Date posted: July 25, 2011 ; Last revised: July 12, 2014
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