Are Mutual Funds Active Voters?

Iliev, Peter; Lowry, Michelle

doi:10.1093/rfs/hhu062

Cited by 312 publications

(99 citation statements)

References 38 publications

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“…Hence, as conjectured, PAs’ influence is stronger among institutional investors with lower incentives to do their own independent research. This result is consistent with recent research showing that mutual funds’ votes tend to deviate from PAs’ recommendations more often when the funds hold a large stake in the portfolio firm and have greater incentives to perform their own research (Iliev and Lowry [], Schouten []).…”

Section: Pas’ Recommendations and Shareholder Votes On Sopsupporting

confidence: 91%

“…These findings suggest that at least some investors, rather than blindly following the recommendations, take into account the underlying rationale and other factors. This more nuanced view of the way investors use PA analyses is consistent with recent evidence on mutual funds’ voting policies (Iliev and Lowry []) and contrasts with the “full causality” view implicitly assumed in prior studies and underlying the policy debate (SEC [])…”

Section: Introductionsupporting

confidence: 77%

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Shareholder Votes and Proxy Advisors: Evidence from Say on Pay

Ertimur

Ferri

Oesch

2013

J of Accounting Research

342

223

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We investigate the economic role of proxy advisors (PAs) in the context of mandatory "say on pay" votes, a novel and complex item requiring significant firm-specific analysis. PAs are more likely to issue an Against recommendation at firms with poor performance and higher levels of CEO pay and do not appear to follow a "one-size-fits-all" approach. PAs' recommendations are the key determinant of voting outcome but the sensitivity of shareholder votes to these recommendations varies with the institutional ownership structure, and the rationale behind the recommendation, suggesting that at least some shareholders do not blindly follow these recommendations. More than half of the firms respond to the adverse shareholder vote triggered by a negative *

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Section: Pas’ Recommendations and Shareholder Votes On Sopsupporting

confidence: 91%

Section: Introductionsupporting

confidence: 77%

Shareholder Votes and Proxy Advisors: Evidence from Say on Pay

Ertimur

Ferri

Oesch

2013

J of Accounting Research

342

223

View full text Add to dashboard Cite

show abstract

“…Previous research indicates that funds that follow PA recommendations belong to smaller fund families, have smaller stakes in the firms that they hold, and have higher turnover rates (Iliev & Lowry, ). We first confirm that these features of PA followers also hold in our sample, and extend this analysis by measuring the relation between funds’ voting habits and the characteristics of the firms that they hold, such as firm size, profitability, leverage, and governance quality (measured along several dimensions).…”

Section: Datamentioning

confidence: 99%

The real effects of proxy advisors on the firm

Calluzzo

Dudley

2018

Financial Management

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This paper examines the influence of proxy advisors (PA) on firm voting outcomes, policies, and value. We measure PA influence with shareholders' historical propensity to follow PA recommendations. PA influence increases the impact of PA recommendations on proxy voting outcomes and firm policies. When shareholders have private incentives to engage in costly research in the absence of a proxy advisor, PA influence neither harms nor benefits shareholder value. However, at firms with dispersed shareholders PA influence can increase value. Our findings are consistent with theories of voting in which proxy advisors compete with private information acquisition efforts by large shareholders.

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“…The effect of ISS's recommendations has been estimated between 13-30%, depending on the type of proposal (e.g., Bethel and Gillan, 2002;Cai, Garner, and Walkling, 2009;Iliev and Lowry, 2015;Malenko and Shen, 2016). To my knowledge, only a few papers have studied the effects of Glass Lewis's recommendations, in addition to ISS's.…”

mentioning

confidence: 99%

Outsourcing Corporate Governance: Conflicts of Interest Within the Proxy Advisory Industry

2018

Management Science

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Proxy advisory firms wield large influence with voting shareholders. However, conflicts of interest may arise when an advisor sells services to both investors and issuers. Using a unique dataset on voting recommendations, I find that for most types of proposals, competition from a new entrant reduces favoritism towards management by an incumbent advisor that serves both corporations and investors. The results are not driven by factors that influence the entrant's coverage decision, such as the marginal cost of new coverage or previously biased recommendations by the incumbent. Similar to other information intermediaries, biased advice by proxy advisors is shown to have real negative consequences, which allow management to enjoy greater private benefits. These results suggest conflicts of interest are a real concern in the proxy advisory industry, and increasing competition could help alleviate them. * I am very grateful for the guidance and support from

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Are Mutual Funds Active Voters?

Cited by 312 publications

References 38 publications

Shareholder Votes and Proxy Advisors: Evidence from Say on Pay

Shareholder Votes and Proxy Advisors: Evidence from Say on Pay

The real effects of proxy advisors on the firm

Outsourcing Corporate Governance: Conflicts of Interest Within the Proxy Advisory Industry

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