Mutual Funds as Monitors: Evidence from Mutual Fund Voting

45 Pages Posted: 16 Mar 2010

See all articles by Angela Morgan

Angela Morgan

Clemson University - Department of Finance

Annette B. Poulsen

University of Georgia - Department of Banking and Finance; European Corporate Governance Institute (ECGI)

Jack G. Wolf

Clemson University - Department of Finance

Tina Yang

University of South Florida - Muma College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2010

Abstract

We address whether mutual funds act effectively as monitors through the proxy voting process by supporting wealth increasing items. We examine 213,579 voting decisions made by 1,799 mutual funds from 94 fund families for 1,047 shareholder proposals voted on between July 2003 and June 2005. In general, mutual funds vote more affirmatively for potentially wealth increasing proposals and funds’ voting approval rates for these beneficial resolutions are significantly higher than those of other investors. Our results suggest that funds tend to support proposals targeting firms with weaker governance. We also find that funds with lower turnover ratios and social funds are more likely to support shareholder proposals. Additionally, fund families display divergence across fund voting decisions on shareholder proposals. Finally, fund voting approval rates significantly impact whether a proposal passes and whether one is implemented. Our findings provide support for mutual funds being effective monitors.

Keywords: Proxy voting, mutual funds, corporate governance, shareholder proposals

JEL Classification: G32, G34, J33

Suggested Citation

Morgan, Angela and Poulsen, Annette B. and Wolf, Jack G. and Yang, Tina, Mutual Funds as Monitors: Evidence from Mutual Fund Voting (March 15, 2010). Available at SSRN: https://ssrn.com/abstract=1572049 or http://dx.doi.org/10.2139/ssrn.1572049

Angela Morgan

Clemson University - Department of Finance ( email )

Clemson, SC 29634
United States
(864) 656-2249 (Phone)
(864) 656-3748 (Fax)

Annette B. Poulsen (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Department of Finance
Athens, GA 30602-6253
United States
706-542-4450 (Phone)

HOME PAGE: http://www.terry.uga.edu/directory/profile/apoulsen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jack G. Wolf

Clemson University - Department of Finance ( email )

324-A Sirrine Hall
Clemson, SC 29634
United States
864-656-3954 (Phone)
864-656-3748 (Fax)

Tina Yang

University of South Florida - Muma College of Business ( email )

140 7th Ave S
St. Petersburg, FL 33701
United States
7278734568 (Phone)

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