Ties That Bind: How Business Connections Affect Mutual Fund Activism
Abstract
We investigate whether business ties with portfolio firms influence mutual funds’ proxy voting using a comprehensive data set spanning 2003 to 2011. In contrast to prior literature, we find that business ties significantly influence pro-management voting at the level of individual pairs of fund families and firms after controlling for Institutional Shareholder Services (ISS) recommendations and holdings. The association is significant only for shareholder-sponsored proposals and stronger for those that pass or fail by relatively narrow margins. Our findings are consistent with a demand-driven model of biased voting in which company managers use existing business ties with funds to influence how they vote.
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- Keyword(s):
- finance 247
- socioeconomics 12
https://kenaninstitute.unc.edu/publication/ties-that-bind-how-business-connections-affect-mutual-fund-activism/
