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Discussion Paper Details

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Title: Investor Ideology

Author(s): Patrick Bolton, Tao Li, Enrichetta Ravina and Howard Rosenthal

Publication Date: March 2019

Keyword(s): institutional investors, Proxy voting and Socially responsible investment

Programme Area(s): Financial Economics

Abstract: We estimate institutional investor preferences based on their proxy voting records in publicly listed Russell 3000 firms. We employ a spatial model of proxy voting, the W-NOMINATE method for scaling legislatures, and map institutional investors onto a left-right dimension based on their votes for fiscal year 2012. The far-left are socially responsible and the far-right are "money conscious" investors. Significant ideological differences reflect an absence of shareholder unanimity. The proxy adviser ISS, similar to a political leader, makes voting recommendations that place it in the center; to the left of most mutual funds. Public pension funds and other investors on the left support a more social and environment-friendly orientation of the firm and fewer executive compensation proposals. A second dimension reflects a more traditional governance view, with management disciplinarian investors, the proxy adviser Glass-Lewis among them, pitted against more management friendly ones.

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Bibliographic Reference

Bolton, P, Li, T, Ravina, E and Rosenthal, H. 2019. 'Investor Ideology'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13633