Are better governed funds better monitors?

Julia Chou; Lilian Ng; Qinghai Wang

doi:10.1016/j.jcorpfin.2011.06.008

Journal of Corporate Finance Vol. 17 No. 5 2011

Are better governed funds better monitors?

Julia Chou¹; Lilian Ng ^2,3; Qinghai Wang^4,5,6

¹ Florida International University · ² York University · ³ University of Wisconsin–Milwaukee · ⁴ Georgia Institute of Technology · ⁵ University of Central Florida · ⁶ Florida College

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.

DOI: 10.1016/j.jcorpfin.2011.06.008
Volume: 17
Issue: 5
Pages: 1254-1271
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Are better governed funds better monitors?

Abstract

Cite