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How do passive funds act as active owners? Evidence from mutual fund voting records11We are grateful for extremely helpful comments from one anonymous referee, Antonio Bernardo, Audra Boone, Mark Garmaise, Derek Horstmeyer, Jim Hsieh, Marc Lipson, Katie Moon, William Mann, Ivo Welch, Geoffrey Zheng, and seminar participants at UCLA Anderson, China International Conference in Finance (CICF), FSU SunTrust Beach Conference, and Eastern Finance Conference. This research was supported by a grant from the Center for Global Management at UCLA Anderson School of Management

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  • Hshieh, Shenje
  • Li, Jiasun
  • Tang, Yingcong

Abstract

The rise of passive institutional investors in the U.S. stock market raises questions about the governance implications to their portfolio firms. While the existing literature documents positive governance changes when passive institutional ownership displaces retail ownership, it remains unclear how passive institutional ownership approaches corporate governance differently than their active peers. This paper compares the proxy voting behaviors between same-family passive and active mutual funds with identical investment styles. We find that passive funds are not more likely to vote in favor of governance reforms than active funds. We also provide suggestive evidence that besides voting, the influence of passive funds on corporate governance also operates through a “behind the scenes” channel.

Suggested Citation

  • Hshieh, Shenje & Li, Jiasun & Tang, Yingcong, 2021. "How do passive funds act as active owners? Evidence from mutual fund voting records11We are grateful for extremely helpful comments from one anonymous referee, Antonio Bernardo, Audra Boone, Mark Garm," Journal of Corporate Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:corfin:v:66:y:2021:i:c:s092911992030136x
    DOI: 10.1016/j.jcorpfin.2020.101692
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