We investigate how business ties with portfolio firms influence mutual funds’ proxy voting using a comprehensive dataset spanning 2003 to 2011. In sharp contrast to the prior literature, we show that the proxy voting of mutual funds is significantly influenced by their business ties with...

We provide a theoretical framework to study blockholder activism by funds who com- pete for investor ?ow. In our model, activists are intrinsically able to raise the value of target ?rms through monitoring. Competition for investor ?ow induces them to enhance the returns generated by monitoring...

Publicly traded corporations are a¤ected by a core agency problem: managers pay the full cost of e¤ort in running the corporations but shareholders enjoy most of the bene?ts. When ownership is dispersed individual shareholders have little incentive to monitor managers and little ability to...

In this paper we develop a simple theoretical model to analyze the impact of institu- tional herding on asset prices. A growing empirical literature has come to the intriguing conclusion that institutional herding positively predicts short-term returns but nega- tively predicts long-term...

Recent studies show that single-quarter institutional herding positively predicts short-term returns. Motivated by the theoretical herding literature, which emphasizes endogenous persistence in decisions over time, we estimate the effect of multi-quarter institutional buying and selling on stock...

Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use their proxy votes in a promanagement manner in order to garner lucrative pensions administration contracts, thus hindering shareholder value. Such...

We study how the presence of multiple participation opportunities coupled with individual learning about payoffs affects the ability of agents to coordinate efficiently in global coordination games. Two players face the option to invest irreversibly in a project in one of many rounds. The...

On 28-29 June 2007, the Financial Markets Group organised a conference covering topics under all three themes of its title, 'Cycles, Contagion and Crises', from the perspective of both developed and emerging economies.

Do large investors increase the vulnerability of a country to speculative attacks in the foreign exchange markets? To address this issue, we build a model of currency crises where a single large investor and a continuum of small investors independently decide whether to attack a currency based...

This paper studies how the introduction of social learning with costs to delay affects coordination games with incomplete information. We present a tractable noisy dynamic coordination game with social learning and costs to delay. We show that this game has a unique monotone equilibrium. A...