Fund Family Matters: How Index Funds Improve Corporate Governance

47 Pages Posted: 27 Mar 2020 Last revised: 15 Jul 2021

See all articles by Emil Lakkis

Emil Lakkis

University of Michigan, Stephen M. Ross School of Business

Date Written: March 19, 2020

Abstract

I propose a novel mechanism that explains why index funds may have a beneficial effect on corporate governance: Increased index fund holdings provide a fund family with greater incentives to monitor management. Mutual fund families centralize voting decisions and may have incentives to monitor even when their individual index funds do not. Increased index fund holdings facilitate the coordination between funds from the same fund family and lead to fewer votes cast in support of the management by funds in the same family. My results demonstrate that when families offer index funds with active funds, the increasing size of index funds does not lead to less monitoring of the management.

Keywords: Corporate Governance, Index Funds, Proxy Voting

JEL Classification: D71, G23, G34

Suggested Citation

Lakkis, Emil, Fund Family Matters: How Index Funds Improve Corporate Governance (March 19, 2020). Available at SSRN: https://ssrn.com/abstract=3557588 or http://dx.doi.org/10.2139/ssrn.3557588

Emil Lakkis (Contact Author)

University of Michigan, Stephen M. Ross School of Business

701 Tappan Street
Ann Arbor, MI Michigan 48109
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
182
Abstract Views
1,163
rank
205,678
PlumX Metrics