Firm Performance and Mutual Fund Voting

37 Pages Posted: 11 Sep 2010

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Qinghai Wang

University of Central Florida - College of Business Administration

Nataliya S. Zaiats

Suffolk University - Sawyer School of Management

Date Written: April 7, 2008

Abstract

We employ a new comprehensive proxy voting records database to investigate whether mutual funds consider prior firm performance when they vote on a diverse range of management- and shareholder-sponsored proposals relating to governance, compensation, and director election. We argue that prior firm performance plays a role in the monitoring effort of mutual funds as they fulfill their fiduciary duties. Results show that voting is related to prior firm performance for selected management and shareholder proposals and that it is consistent with Institutional Shareholder Services’ recommendations. Mutual funds support management (shareholder) proposals less (more) when prior firm performance has been weak. Furthermore, even when mutual funds deviate from their fund family’s voting policies, they attach importance to prior firm performance, and their voting is, to a certain degree, affected by business ties.

Keywords: Proxy voting, Voting policies, Mutual funds, Business ties, Institutional Shareholder Services (ISS)

JEL Classification: G23, G34

Suggested Citation

Ng, Lilian and Wang, Qinghai and Zaiats, Nataliya S., Firm Performance and Mutual Fund Voting (April 7, 2008). Journal of Banking and Finance, Vol. 33, No. 12, 2009, Available at SSRN: https://ssrn.com/abstract=1674682

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

Nataliya S. Zaiats (Contact Author)

Suffolk University - Sawyer School of Management ( email )

Boston, MA 02108
United States

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