The Party Structure of Mutual Funds

78 Pages Posted: 27 Feb 2018 Last revised: 23 Dec 2020

See all articles by Ryan Bubb

Ryan Bubb

New York University School of Law; European Corporate Governance Institute (ECGI)

Emiliano Catan

New York University School of Law

Date Written: December 15, 2020

Abstract

We investigate the structure of mutual funds’ corporate governance preferences as revealed by how they vote their shares in portfolio companies. We apply unsupervised learning tools from the machine learning literature to analyze a comprehensive dataset of mutual funds’ votes and find that a parsimonious two-dimensional model can explain the bulk of mutual fund voting. The two dimensions capture competing visions of corporate governance and are closely related to the recommendations of the leading proxy advisors. Model-based cluster analysis shows that mutual funds are organized into three ‘parties’—the Traditional Governance Party, the Shareholder Reform Party, and the Shareholder Protest Party—that follow distinctive philosophies of corporate governance and shareholders’ role. Our preference measures for mutual funds generate a range of insights about the broader system of corporate governance.

Keywords: mutual funds, proxy voting, spatial models, corporate governance

JEL Classification: G30, G23

Suggested Citation

Bubb, Ryan and Catan, Emiliano, The Party Structure of Mutual Funds (December 15, 2020). European Corporate Governance Institute - Law Working Paper 560/2020, Available at SSRN: https://ssrn.com/abstract=3124039 or http://dx.doi.org/10.2139/ssrn.3124039

Ryan Bubb (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
(212)992-8871 (Phone)

HOME PAGE: http://https://its.law.nyu.edu/facultyprofiles/profile.cfm?personID=34148

European Corporate Governance Institute (ECGI) ( email )

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

Emiliano Catan

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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