Working Paper: CEPR ID: DP8587
Authors: Amil Dasgupta; Konstantinos Zachariadis
Abstract: Mutual funds are signi ficant blockholders in many corporations. Concerns that funds vote in a pro-management manner to garner lucrative pensions contracts led the SEC to mandate the disclosure of proxy votes. We present a model of mutual fund voting inthe presence of potential business ties. We characterize the limits of delegated activism by mutual funds pre- and post-disclosure and show that disclosure is not a panacea: for some proposals disclosure hurts activism. The desirability of disclosure also depends onthe distribution of business ties amongst mutual funds. We provide support for existing empirical findings and generate new testable implications.
Keywords: Corporate Governance; Activist Investors; Mutual Funds; Delegated Portfolio Management
JEL Codes: G0; G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mutual funds' business ties with portfolio firms (G23) | mutual funds' voting behavior (G34) |
| mutual funds' voting behavior (G34) | shareholder activism (G34) |
| mandatory disclosure of proxy votes (G34) | mutual funds' voting behavior (G34) |
| mandatory disclosure of proxy votes (G34) | shareholder activism (G34) |
| distribution of business ties among mutual funds (G23) | shareholder activism (G34) |