The Decoupling of Voting and Economic Ownership (IVOR nr. 88) 2012/4.2.1:4.2.1 Determinants of Voting Behaviour

The Decoupling of Voting and Economic Ownership (IVOR nr. 88) 2012/4.2.1

4.2.1 Determinants of Voting Behaviour

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Most recent empirical studies of institutional investor voting use publicly available data on mutual fund voting. Determinants of voting behaviour identified in these studies include:

(1)

portfolio firm characteristics, such as performance and governance structure (see e.g. Ashraf & Jayaraman 2006, Ng et al. 2007, Morgan et al. 2011, see also Gordon & Pound 1993), size (Duan & Jiao 2011), as well as ownership structure and nationality (Iliev et al. 2010);

(2)

holding characteristics, notably the size of the stake in the portfolio firm (see e.g. Morgan et al. 2011);

(3)

fund characteristics, such as business ties (Davis & Kim 2007, Ashraf et al. 2010), the level of coordination at the fund family level (Rothberg & Lillien 2006, Morgan et al. 2011), fund past performance (Morgan et al. 2011), investment strategy (Rothberg & Lillien 2006, Ashraf & Jayaraman 2006), and turnover ratio and net assets (Cremers & Romano 2011); and

(4)

other factors, including the expected voting behaviour of peer funds (Matvos & Ostrovsky 2010a), cross-ownership (Matvos & Ostrovsky 2010b, Harford et al. 2010) and, important for our purposes, the recommendations of proxy advisors (see section 4.2.2 below).

Many of the aforementioned studies have explored the impact of these variables on funds' propensity to vote AGAINST management, i.e. to deviate from management's recommendation. In this paper, we explore the relationship between these variables and funds' propensity to deviate from their proxy advisor's recommendation.

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