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

May 15, 2015

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 arbitrary pairs of fund-families and firms and individual proposals 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 proxy voting in which company managers use existing business ties with institutional investors to influence voting.

Number of Pages in PDF File: 96

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: May 16, 2015

Suggested Citation

Cvijanovic, Dragana and Dasgupta, Amil and Zachariadis, Konstantinos E., Ties that Bind: How Business Connections Affect Mutual Fund Activism (May 15, 2015). 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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