Active Mutual Fund Common Owners' Returns and Proxy Voting Behavior

Working Paper
2023 European Finance Association Poster Session, NBIM-Oxford Conference on Common Ownership*, UIUC doctoral student seminar, 2023 Midwest Finance Association Conference, 2022 Australasian Finance and Banking Conference*, 2022 International Society for the Advancement of Financial Economics' Conference, 2022 Singapore Scholars Symposium*, 2022 Chinese Finance Annual Meeting*, 2022 Asian Finance Association Conference*, 2022 Financial Markets and Corporate Governance Conference*, the 14th Annual Risk Management Conference*, and NUS brown bag seminar

We find that active mutual funds owning product market competitors have superior risk-adjusted returns that are not driven by industry concentration, common selection, or stock picking ability. These funds charge higher fees but also generate persistent net-of-fee returns for investors. Funds with higher common ownership are more active voters who are more likely to vote against executive incentives compensation and for directors with existing directorships in competitors. Our findings suggest some actively-managed mutual funds have an incentive to soften product market competition and that proxy voting could serve as one mechanism for influencing corporate policy.

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