Conflict of Interest and Proxy Voting by Institutional Investors

59 Pages Posted: 21 Sep 2018 Last revised: 17 May 2019

See all articles by Ying Duan

Ying Duan

Simon Fraser University (SFU) - Beedie School of Business

Yawen Jiao

University of California, Riverside

Kinsun Tam

SUNY University at Albany

Date Written: May 2019

Abstract

The pension business ties mutual funds have with portfolio firms can bias them toward firm management. Political pressures can bias public pension funds toward activist shareholders. This paper examines how these conflicts of interests affect institutional investors’ proxy voting behavior. We find that public pension funds (mutual funds) are considerably more supportive of activist shareholders (firm management) in voting, even if doing so may harm investment value. The biases are more pronounced when incentive conflicts are stronger. The results are not driven by proposals related to specific topics or filed by specific sponsors. Conflicted public pension funds are particularly active in supporting value reducing shareholder proposals.

Keywords: conflict of interest; institutional investors; proxy voting; corporate governance

JEL Classification: G23; G34

Suggested Citation

Duan, Ying and Jiao, Yawen and Tam, Kinsun, Conflict of Interest and Proxy Voting by Institutional Investors (May 2019). Available at SSRN: https://ssrn.com/abstract=3252801 or http://dx.doi.org/10.2139/ssrn.3252801

Ying Duan (Contact Author)

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Yawen Jiao

University of California, Riverside ( email )

Riverside, CA 92521
United States

Kinsun Tam

SUNY University at Albany ( email )

1400 Washington Avenue
Building, Room 109
Albany, NY 12222
United States

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