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The Party Structure of Mutual Funds

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  • Ryan Bubb
  • Emiliano M Catan

Abstract

We investigate the structure of mutual funds’ corporate governance preferences as revealed by how they vote their shares in portfolio companies. We apply unsupervised learning tools from the machine learning literature to analyze mutual funds’ votes and find that a parsimonious two-dimensional model can explain the bulk of mutual fund voting. The dimensions capture competing visions of corporate governance and are related to the leading proxy advisors’ recommendations. Cluster analysis shows that mutual funds are organized into three “parties”—the Traditional Governance Party, Shareholder Reform Party, and Shareholder Protest Party—that follow distinctive philosophies of corporate governance and shareholders’ role.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Ryan Bubb & Emiliano M Catan, 2022. "The Party Structure of Mutual Funds," The Review of Financial Studies, Society for Financial Studies, vol. 35(6), pages 2839-2878.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:6:p:2839-2878.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab082
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    More about this item

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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