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Mutual funds as monitors: Evidence from mutual fund voting

Author

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  • Morgan, Angela
  • Poulsen, Annette
  • Wolf, Jack
  • Yang, Tina

Abstract

We address how mutual funds vote on shareholder proposals and identify factors that help determine support of wealth-increasing shareholder proposals. We examine 213,579 voting decisions made by 1799 mutual funds from 94 fund families for 1047 shareholder proposals voted on between July 2003 and June 2005. In an analysis of voting across funds within the same fund family, we find significant divergence in voting within families, emphasizing the importance of focusing on voting by individual funds. We also find that, in general, mutual funds vote more affirmatively for potentially wealth-increasing proposals and funds' voting approval rates for these beneficial resolutions are significantly higher than those of other investors. Our results suggest that funds tend to support proposals targeting firms with weaker governance. We also find that funds with lower turnover ratios and social funds are more likely to support shareholder proposals. Finally, fund voting approval rates significantly impact whether a proposal passes and whether one is implemented.

Suggested Citation

  • Morgan, Angela & Poulsen, Annette & Wolf, Jack & Yang, Tina, 2011. "Mutual funds as monitors: Evidence from mutual fund voting," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 914-928, September.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:4:p:914-928
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    References listed on IDEAS

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    3. Yang, Tina & Zhao, Shan, 2014. "CEO duality and firm performance: Evidence from an exogenous shock to the competitive environment," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 534-552.
    4. Armstrong, Christopher S. & Gow, Ian D. & Larcker, David F., 2012. "The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans," Research Papers 2097, Stanford University, Graduate School of Business.
    5. repec:eee:corfin:v:47:y:2017:i:c:p:191-218 is not listed on IDEAS
    6. 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.
    7. 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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    10. Lee, Sanglae, 2015. "Corporate Governance And Firm Performance: Evidence From Institutional Investors And Proxy Voting In Korea," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 35-53, June.
    11. Chou, Julia & Ng, Lilian & Wang, Qinghai, 2011. "Are better governed funds better monitors?," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1254-1271.
    12. Dimmock, Stephen G. & Gerken, William C. & Ivković, Zoran & Weisbenner, Scott J., 2018. "Capital gains lock-in and governance choices," Journal of Financial Economics, Elsevier, vol. 127(1), pages 113-135.
    13. Zalewska, Anna, 2014. "Gentlemen do not talk about money: Remuneration dispersion and firm performance relationship on British boards," Journal of Empirical Finance, Elsevier, vol. 27(C), pages 40-57.

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