Mutual Fund Disagreement and Firm Value: Passive vs. Active Voice
85 Pages Posted: 23 Aug 2021 Last revised: 14 Nov 2022
Date Written: August 19, 2021
We develop a novel measure of disagreement in voice between active and passive mutual funds using their proxy votes that captures shareholder conflicts in public firms. We show that the disagreement in voice between passive and active mutual funds destroys firm value and suggest that the firm value loss is due to conflicting incentives between the two groups of mutual funds. Using Federal Open Market Committee announcements with press conferences as events that create scope for investors to make informed votes and interpret news differently for individual firms, we show that such value-destroying effect of disagreement is likely causal.
Keywords: Corporate governance, Voting, Disagreement
JEL Classification: G14, G23, G34
Suggested Citation: Suggested Citation