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What Is the Impact of Mutual Funds' ESG Preferences on Portfolio Firms?

Author

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  • Maxime Couvert

    (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute)

Abstract

Mutual funds must publish policies announcing how they generally vote on the different ballot items at the shareholder meetings of their portfolio firms. I manually collect 17,000 of these policies for a sample of 29 of the largest U.S. mutual fund families over 2006-2018. I find that voting policies are a major predictor of funds' voting behavior. Exploiting staggered changes in funds' voting policies, I show that investee companies adopt their mutual fund shareholders' preferred governance provisions. This adoption is the result of mutual fund shareholders' active voting. Announced voting policies also stimulate strategic proposal submissions by non-mutual fund shareholders.

Suggested Citation

  • Maxime Couvert, 2021. "What Is the Impact of Mutual Funds' ESG Preferences on Portfolio Firms?," Swiss Finance Institute Research Paper Series 21-42, Swiss Finance Institute, revised Jul 2021.
    • Handle: RePEc:chf:rpseri:rp2142
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    Keywords

    Corporate governance; corporate social responsibility; proxy voting; mutual funds;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • 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
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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