Voting Choice

60 Pages Posted: 22 Mar 2023 Last revised: 18 Apr 2024

See all articles by Andrey Malenko

Andrey Malenko

Boston College; European Corporate Governance Institute (ECGI)

Nadya Malenko

Boston College, Carroll School of Management; National Bureau of Economic Research (NBER); Finance Theory Group (FTG); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2024

Abstract

Traditionally, fund managers cast votes on behalf of fund investors. Recently, there is a shift towards "pass-through voting," with fund managers offering their investors a choice: delegate their votes to the fund or vote themselves. We develop a theory of delegation of voting rights to study the implications of such voting choice. If investors have heterogeneous preferences, voting choice may decrease investor welfare because investors retain voting rights excessively, prioritizing their preferences over information. If investors have heterogeneous information, voting choice generally improves investor welfare. However, it may decrease fund managers' information collection effort, resulting in less informed voting outcomes.

Keywords: voting, delegation, voting choice, pass-through voting, ESG, index funds, aggregation of information, heterogeneous preferences, externalities

JEL Classification: D72, D82, D83, G34, K22

Suggested Citation

Malenko, Andrey and Malenko, Nadya, Voting Choice (April 7, 2024). European Corporate Governance Institute – Finance Working Paper No. 910/2023, Olin Business School Center for Finance & Accounting Research Paper No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=4390367 or http://dx.doi.org/10.2139/ssrn.4390367

Andrey Malenko

Boston College

140 Commonwealth Avenue
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European Corporate Governance Institute (ECGI) ( email )

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

Nadya Malenko (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Finance Theory Group (FTG) ( email )

United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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