Conflict of Interest and Proxy Voting by Institutional Investors

54 Pages Posted: 21 Sep 2018 Last revised: 20 Jul 2021

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: July 15, 2021

Abstract

Political pressures can bias public pension funds toward activist shareholders. The pension business ties mutual funds have with portfolio firms can bias them toward firm management. We examine how these contrasting conflicts of interest affect institutional investors’ proxy voting behavior and show 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. Public pension funds support shareholder (management) proposals more (less) when Democrats gain more power in the fund’s home state. Conflicted public pension funds are particularly active in supporting value reducing shareholder proposals.

Keywords: conflict of interest; public pension funds; institutional investors; proxy voting

JEL Classification: G23; G34

Suggested Citation

Duan, Ying and Jiao, Yawen and Tam, Kinsun, Conflict of Interest and Proxy Voting by Institutional Investors (July 15, 2021). 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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