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Would Mutual Funds Bite the Hand that Feeds Them? Business Ties and Proxy Voting

45 Pages Posted: 15 Feb 2005  

Gerald F. Davis

University of Michigan, Stephen M. Ross School of Business

E. Han Kim

University of Michigan, Stephen M. Ross School of Business

Date Written: February 15, 2005

Abstract

This paper analyzes conflicts of interest in proxy voting by mutual funds using newly-available data on funds' voting records for 2004. We first examine mutual funds' ties to corporate clients created via pension fund business and their patterns of portfolio ownership. We then link these to proxy votes at specific firms and to overall voting policies for 21 mutual fund families, CalPERS and CREF. Among large fund families, levels of ownership are essentially independent of client relationships between mutual funds and firms, and funds are no more likely to vote with management at client firms than non-clients. At the policy level, however, we find a positive relation between the volume of pension business a fund's parent does and its propensity to vote with management.

Keywords: Conflicts of interest, proxy voting, mutual funds, employee pension plans

JEL Classification: G23, G34, L14

Suggested Citation

Davis, Gerald F. and Kim, E. Han, Would Mutual Funds Bite the Hand that Feeds Them? Business Ties and Proxy Voting (February 15, 2005). Available at SSRN: https://ssrn.com/abstract=667625 or http://dx.doi.org/10.2139/ssrn.667625

Gerald F. Davis (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States
734-647-4737 (Phone)
734-936-0282 (Fax)

E. Han Kim

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-2282 (Phone)
734-763-3117 (Fax)

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