Abstract

http://ssrn.com/abstract=2317212
 
 

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Ties that Bind: How Business Connections Affect Mutual Fund Activism


Dragana Cvijanovic


University of North Carolina Kenan-Flagler Business School

Amil Dasgupta


London School of Economics (LSE); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Konstantinos E. Zachariadis


London School of Economics

August 10, 2014

European Corporate Governance Institute (ECGI) - Finance Working Paper No. 438/2014
UNC Kenan-Flagler Research Paper No. 2317212

Abstract:     
We investigate whether business ties with portfolio firms influence mutual funds’ proxy voting using a comprehensive dataset spanning 2003 to 2011. In contrast to the prior literature, we find that ties significantly influence voting at the level of individual proposals after controlling for unobserved heterogeneity across firms, funds, and time, and for ISS recommendations and holdings. The effect is strongest for highly contested proposals where votes are critical. The prominent 2006 class action lawsuits against 401(K) sponsors and providers affected the voting of fund families differently depending on whether they were sued, suggesting a link between investor attention and corporate governance.

Number of Pages in PDF File: 40

Keywords: mutual funds, activism, business ties, proxy vote disclosure

JEL Classification: D72, G23, G34, G38, K22

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Date posted: August 29, 2013 ; Last revised: September 20, 2014

Suggested Citation

Cvijanovic, Dragana and Dasgupta, Amil and Zachariadis, Konstantinos E., Ties that Bind: How Business Connections Affect Mutual Fund Activism (August 10, 2014). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 438/2014; UNC Kenan-Flagler Research Paper No. 2317212. Available at SSRN: http://ssrn.com/abstract=2317212 or http://dx.doi.org/10.2139/ssrn.2317212

Contact Information

Dragana Cvijanovic
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Amil Dasgupta
London School of Economics (LSE) ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7458 (Phone)
+44 20 7955 7420 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Konstantinos E. Zachariadis (Contact Author)
London School of Economics ( email )
Houghton St
Department of Finance
London, WC2A 2AE
United Kingdom
+442079556541 (Phone)
+442078494647 (Fax)
HOME PAGE: http://www2.lse.ac.uk/finance/people/profiles/KostasZachariadis.aspx
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