Working Paper: NBER ID: w15449
Authors: Martijn Cremers; Roberta Romano
Abstract: This paper examines the impact on shareholder voting of the mutual fund voting disclosure regulation adopted by the SEC in 2003, using a paired sample of management proposals on executive equity incentive compensation plans submitted before and after the rule change. While voting support for management has decreased over time, we find no evidence that mutual funds' support for management declined after the rule change, as expected by advocates of disclosure. In fact, we find evidence of increased support for management by mutual funds after the change. There is some evidence that firms sponsoring such proposals both before and after the rule change differ from those sponsoring a proposal only before the change. For example, firms are more likely to sponsor a proposal both before and after the rule change if they have higher mutual fund ownership. Such endogeneity could partly explain our findings of increased support after the rule.
Keywords: mutual funds; proxy voting; corporate governance; institutional investors; regulation
JEL Codes: G23; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mutual fund voting disclosure rule (G34) | mutual fund voting behavior (G34) |
| mutual fund ownership levels (G23) | voting outcomes (D72) |
| after dummy variable (C29) | voting outcomes (D72) |
| mutual fund holdings + after dummy variable (G23) | voting support for management-sponsored EEIC proposals (G34) |
| higher mutual fund ownership (G23) | support for management-sponsored proposals (M54) |
| 2003 rule change (Z28) | mutual funds support for management (G23) |
| higher mutual fund ownership (G23) | likelihood of sponsoring proposals (Z23) |