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Are better governed funds better monitors?

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Author Info

  • Chou, Julia
  • Ng, Lilian
  • Wang, Qinghai
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    Abstract

    Using Morningstar mutual fund stewardship grade data, we find that the governance mechanisms of mutual funds play a key role in their monitoring of portfolio firms and in their investment decisions. Mutual funds with better governance practices tend to vote responsibly on corporate governance proposals of their portfolio firms and also provide better return performance. Furthermore, these funds tend to avoid investing in poorly governed firms. The results suggest that funds with quality governance are more likely to act in the interest of their investors, and that costs associated with funds' monitoring of their portfolio firms do not adversely affect their return performance.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0929119911000678
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 17 (2011)
    Issue (Month): 5 ()
    Pages: 1254-1271

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    Handle: RePEc:eee:corfin:v:17:y:2011:i:5:p:1254-1271

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: Proxy voting; Corporate governance; Mutual funds;

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    Cited by:
    1. Cumming, Douglas & Dai, Na & Haß, Lars Helge & Schweizer, Denis, 2012. "Regulatory induced performance persistence: Evidence from hedge funds," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1005-1022.
    2. Jackowicz, Krzysztof & Kowalewski, Oskar, 2012. "Crisis, internal governance mechanisms and pension fund performance: Evidence from Poland," Emerging Markets Review, Elsevier, vol. 13(4), pages 493-515.
    3. Nain, Amrita & Yao, Tong, 2013. "Mutual fund skill and the performance of corporate acquirers," Journal of Financial Economics, Elsevier, vol. 110(2), pages 437-456.
    4. Ding, Rong & Hou, Wenxuan & Kuo, Jing-Ming & Lee, Edward, 2013. "Fund ownership and stock price informativeness of Chinese listed firms," Journal of Multinational Financial Management, Elsevier, vol. 23(3), pages 166-185.

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