Journal of Financial Economics Vol. 127 No. 1 2018
Capital gains lock-in and governance choices
Abstract
Differences in accrued gains and investors’ tax-sensitivity induce variation in a capital gains lock-in effect across mutual funds even for the same stock at the same time. Exploiting this variation, we show this effect influences funds’ governance decisions: higher capital gains decrease the likelihood a fund exits prior to contentious votes and increase the likelihood a fund votes against management. Consistent with tax motivation, these findings are concentrated among funds with tax-sensitive investors. Further, high aggregate capital gains across funds holding a stock predict a higher likelihood management loses a vote and a lower likelihood a contentious vote is proposed.
- DOI
- 10.1016/j.jfineco.2017.11.001
- Volume
- 127
- Issue
- 1
- Pages
- 113-135
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref