Author ORCID Identifier

https://orcid.org/0000-0001-8130-6252

Year of Publication

2020

Degree Name

Doctor of Philosophy (PhD)

Document Type

Doctoral Dissertation

College

Business and Economics

Department

Finance and Quantitative Methods

First Advisor

Dr. William C. Gerken

Abstract

In my first chapter, I examine how index funds vote their proxies on firms in its index that their family does not hold in its actively managed funds. For a given proxy proposal at a given point in time, I find that an index fund is more likely to oppose management on shares its family does not hold in its active funds than on shares its family does hold in its active funds. I further demonstrate that index fund governance has positive effects on the probability a proposal passes and on shareholder value. In my second chapter coauthored with Will Gerken and Steve Dimmock, we document the prevalence and variety of frauds committed by investment managers. We show that prior legal and regulatory violations, conflicts-of-interest, and monitoring disclosures available via the Security and Exchange Commission’s Form ADV are useful for predicting fraud. Additional tests show that fraud by rogue employees is more predictable than firm-wide fraud, but both types of fraud are significantly predictable. We revisit the fraud prediction model of Dimmock and Gerken (2012) and test its performance out-of-sample (using fraud cases discovered since that article’s publication). We find the model has significant predictive power for the out-of-sample cases. To encourage additional research in this area, we have made the data used in this chapter publicly available at https://doi.org/10.13023/nsjd-rk62. In my third chapter, I find the divergence ratio, the percentage of time funds within a family vote differently from one another on the same proposal at a shareholder meeting, varies significantly across fund families. Funds of families in the highest divergence quintile realize alphas up to 104 basis points higher than funds of families in the lowest quintile. These findings are consistent with the separating equilibrium theory of Evans, Prado, and Zambrana (2017) who find that some families encourage coordination among their funds while others encourage competition.

Digital Object Identifier (DOI)

https://doi.org/10.13023/etd.2020.080

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