Are Mutual Funds Active Voters?

Review of Financial Studies, 2015

64 Pages Posted: 13 Sep 2012 Last revised: 9 Apr 2015

See all articles by Peter Iliev

Peter Iliev

Pennsylvania State University - Department of Finance

Michelle Lowry

Drexel University

Date Written: April 15, 2014


Mutual funds vary greatly in their reliance on proxy advisory recommendations. Over 25% of funds rely almost entirely on ISS recommendations, while other funds place little weight on them. Funds with higher benefits and lower costs of researching items up for vote are less likely to rely on ISS. These actively voting funds are less likely vote in a 'one size fits all' manner and they earn higher alphas, consistent with benefits from this allocation of resources. For the underlying firms, the presence of actively voting funds mitigates the influence of ISS and helps sway shareholder votes toward value-maximizing outcomes.

Keywords: Shareholder voting, agency costs, monitors, mutual funds

JEL Classification: G30

Suggested Citation

Iliev, Peter and Lowry, Michelle B., Are Mutual Funds Active Voters? (April 15, 2014). Review of Financial Studies, 2015. Available at SSRN: or

Peter Iliev

Pennsylvania State University - Department of Finance ( email )

348 Business Building
University Park, PA 16802
United States

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

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