Picking Friends Before Picking (Proxy) Fights: How Mutual Fund Voting Shapes Proxy Contests

97 Pages Posted: 17 Jan 2018 Last revised: 14 Jun 2021

See all articles by Alon Brav

Alon Brav

Duke University - Fuqua School of Business; European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Wei Jiang

Columbia Business School - Finance and Economics; ECGI; NBER

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

James Pinnington

Duke University- Fuqua School of Business

Date Written: November 1, 2020

Abstract

This paper provides the first comprehensive study of mutual fund voting in proxy contests. Funds tend to vote against incumbent management at firms with weak operating and financial performance, and in favor of dissidents with credible track records. Passive funds are active monitors although they are more supportive of incumbent management than active funds. We document a positive selection effect: dissidents are more likely to initiate contests and proceed to voting when shareholders are expected to be more supportive based on observable and unobservable event characteristics as well as inherent pro-activist investor stance. Overall, institutional investors play a pivotal role in shaping the initiation and outcomes of proxy contests.

Keywords: Mutual fund voting, Proxy contest, Selective targeting, Investor stance

JEL Classification: G320, G340, G380

Suggested Citation

Brav, Alon and Jiang, Wei and Li, Tao and Pinnington, James, Picking Friends Before Picking (Proxy) Fights: How Mutual Fund Voting Shapes Proxy Contests (November 1, 2020). Columbia Business School Research Paper No. 18-16, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 601/2019, Available at SSRN: https://ssrn.com/abstract=3101473 or http://dx.doi.org/10.2139/ssrn.3101473

Alon Brav

Duke University - Fuqua School of Business ( email )

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European Corporate Governance Institute (ECGI) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Wei Jiang

Columbia Business School - Finance and Economics ( email )

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ECGI ( email )

c/o the Royal Academies of Belgium
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NBER ( email )

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Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

James Pinnington

Duke University- Fuqua School of Business ( email )

Durham, NC
United States

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