(Re)call of Duty: Mutual Fund Securities Lending and Proxy Voting

56 Pages Posted: 15 Mar 2024 Last revised: 26 Mar 2024

See all articles by Tao Li

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Qifei Zhu

Nanyang Business School, Nanyang Technological University

Date Written: November 15, 2023

Abstract

Taking advantage of a novel dataset on individual mutual funds' securities lending activities, we provide the first systematic evidence that mutual funds, especially ESG funds, recall loaned shares prior to voting record dates. Funds' recall-voting sensitivities differ based on their stated lending policies, ownership stakes in portfolio firms, and holding horizons, indicating heterogeneity in funds' perceived values of voting rights. Recalled shares are more likely to be voted against management proposals, and in favor of shareholder proposals and dissident slates in proxy contests. Recall-sensitive funds attract higher fund flows and do not suffer poor performance because of foregone lending revenues.

Keywords: Securities lending, stock loan recalls, proxy voting, ESG funds, corporate governance

JEL Classification: G23, G32, G34, G38

Suggested Citation

Li, Tao and Zhu, Qifei, (Re)call of Duty: Mutual Fund Securities Lending and Proxy Voting (November 15, 2023). Available at SSRN: https://ssrn.com/abstract=4757185 or http://dx.doi.org/10.2139/ssrn.4757185

Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Qifei Zhu

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

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