(Black)Rock the Vote: Index Funds and Opposition to Management

55 Pages Posted: 26 Mar 2020 Last revised: 15 May 2020

See all articles by Joseph Farizo

Joseph Farizo

University of Kentucky - Department of Finance & Quantitative Methods

Date Written: March 23, 2020

Abstract

I propose a novel identification strategy to examine whether “passive” index funds participate in monitoring. Specifically, I examine how index funds vote their proxies on firms in its index that their family does not hold in its actively managed funds. For a given proxy proposal at a given point in time, I find that an index fund is more likely to oppose management on shares its family does not hold in its active funds than on shares its family does hold in its active funds. I further demonstrate that index fund governance has positive effects on the probability a proposal passes and on shareholder value.

Keywords: Index funds, governance, proxy voting

JEL Classification: G23, G30, G34

Suggested Citation

Farizo, Joseph, (Black)Rock the Vote: Index Funds and Opposition to Management (March 23, 2020). Available at SSRN: https://ssrn.com/abstract=3559783 or http://dx.doi.org/10.2139/ssrn.3559783

Joseph Farizo (Contact Author)

University of Kentucky - Department of Finance & Quantitative Methods ( email )

Lexington, KY 40506
United States

HOME PAGE: http://www.josephfarizo.com

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