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The Role of Mutual Funds in Corporate Governance: Evidence from Mutual Funds’ Proxy Voting and Trading Behavior

Published online by Cambridge University Press:  15 April 2016

Ying Duan  and
Yawen Jiao
Ying Duan
Affiliation:
ying_duan@sfu.ca, Simon Fraser University, Beedie School of Business, Burnaby, BC V5A 1S6, Canada
Yawen Jiao*
Affiliation:
yawenj@ucr.edu, University of California at Riverside, School of Business Administration, Riverside, CA 92521.
*
*Corresponding author: yawenj@ucr.edu
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Abstract

This paper examines mutual fund families’ proxy voting records to analyze their choices between voting against management (“voice”) and voting with their feet (“exit”). Even though proxy voting is particularly conducive to governance through voice rather than exit, we provide evidence that both exit and voice are important governance mechanisms when Institutional Shareholder Services recommends voting against management. Funds with smaller ownership blocks and shorter investment horizons are more likely to exit, and funds are more likely to exit small, liquid firms with greater insider ownership.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 2 , April 2016 , pp. 489 - 513
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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