Are better governed funds better monitors? |
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Authors: | Julia Chou Lilian Ng Qinghai Wang |
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Institution: | aCollege of Business Administration, Florida International University, Miami, FL 33199, USA;bSheldon B. Lubar School of Business, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA;cCollege of Management, Georgia Institute of Technology, Atlanta, GA 30308, USA |
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Abstract: | Using Morningstar mutual fund stewardship grade data, we find that the governance mechanisms of mutual funds play a key role in their monitoring of portfolio firms and in their investment decisions. Mutual funds with better governance practices tend to vote responsibly on corporate governance proposals of their portfolio firms and also provide better return performance. Furthermore, these funds tend to avoid investing in poorly governed firms. The results suggest that funds with quality governance are more likely to act in the interest of their investors, and that costs associated with funds' monitoring of their portfolio firms do not adversely affect their return performance. |
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Keywords: | JEL classification: G11 G23 G34 |
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