Abstract

http://ssrn.com/abstract=962126
 
 

References (56)



 
 

Citations (8)



 


 



Determinants and Consequences of Proxy Voting By Mutual Funds on Shareholder Proposals


Rasha Ashraf


Georgia State University - Department of Finance

Narayanan Jayaraman


Georgia Institute of Technology - Finance Area

February 2007


Abstract:     
We analyze mutual funds' proxy voting records on shareholder proposals and investigate the following three issues. First, we study the determinants of mutual funds' voting policies across firms. Next, we examine the incentive structure of mutual funds that could act as a motivational force for them to undertake an activist role in their proxy voting behavior. Last, we investigate the trading behavior of mutual funds surrounding proposal meeting date and voting record release date and investigate whether mutual funds engage in "Wall Street Walk," that is, sell off their shares when dissatisfied with firms' management. Our results indicate that mutual funds support shareholder proposals and vote against management for proposals that are likely to increase shareholders' wealth and rights, in firms with weaker external monitoring mechanisms and in firms with entrenched management. The level of insider voting rights and the internal governance mechanism through blockholder ownership also influence funds' voting decisions. Moreover, mutual funds' motivation to take on an activist role does not come from their ownership concentration, but rather from their long-term investment goal. The results further indicate that there is a positive reputational effect for the funds undertaking a monitoring role in their voting strategies. The trading behavior of mutual funds suggests that funds reduce holdings when they disapprove of managements' policy, but before doing so they take on an activist role by supporting shareholder proposals.

Number of Pages in PDF File: 52

Keywords: proxy voting, mutual funds, corporate governance

JEL Classification: G23, G34

working papers series


Download This Paper

Date posted: March 13, 2007  

Suggested Citation

Ashraf, Rasha and Jayaraman, Narayanan, Determinants and Consequences of Proxy Voting By Mutual Funds on Shareholder Proposals (February 2007). Available at SSRN: http://ssrn.com/abstract=962126 or http://dx.doi.org/10.2139/ssrn.962126

Contact Information

Rasha Ashraf (Contact Author)
Georgia State University - Department of Finance ( email )
35 Broad Street
Suite 1238
Atlanta, GA 30303
United States
404-413-7348 (Phone)
404-894-6030 (Fax)
Narayanan Jayaraman
Georgia Institute of Technology - Finance Area ( email )
755 Ferst Drive
Atlanta, GA 30332
United States
404-894-4389 (Phone)
404-894-6030 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 1,599
Downloads: 400
Download Rank: 39,938
References:  56
Citations:  8

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.406 seconds