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Geographical Proximity and Mutual Funds' Proxy Voting Behavior
Author(s) -
Das Praveen K.
Publication year - 2011
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1540
Subject(s) - voting , proxy voting , proxy (statistics) , voting trust , shareholder , mutual fund , business , fund administration , accounting , economics , disapproval voting , politics , finance , actuarial science , fund of funds , corporate governance , political science , law , computer science , machine learning , market liquidity
This paper examines the influence of geographical proximity on mutual fund proxy voting decisions. Using mutual fund proxy voting data for the sample period July 1, 2003 to June 30, 2004, we find that fund managers vote more in favor of management of locally headquartered firms. The results are strong for proposals related to executive compensation, anti‐takeover provisions, social and political issues. We provide evidence to show that bias in proxy voting is not being driven by informational advantage; voting bias is prevalent in small as well as large size companies. Additionally, the voting pattern suggests that geographical proximity does not facilitate in better corporate monitoring as revealed in their voting decisions. We find that local fund managers vote more favorably in those proposals which do not increase shareholders' wealth and rights. Our results suggest that familiarity and social interaction between fund managers and firm executives located in the same geographic area might explain the local bias in mutual fund proxy voting behavior. Copyright © 2011 John Wiley & Sons, Ltd.