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Ties that bind: how business connections affect mutual fund activism

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  • Cvijanović, Dragana
  • Dasgupta, Amil
  • Zachariadis, Konstantinos

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 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.

Suggested Citation

  • Cvijanović, Dragana & Dasgupta, Amil & Zachariadis, Konstantinos, 2016. "Ties that bind: how business connections affect mutual fund activism," LSE Research Online Documents on Economics 65929, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:65929
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    References listed on IDEAS

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    More about this item

    Keywords

    mutual funds; activism; business ties; proxy vote disclosure;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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