We develop a direct measure of investor scrutiny to assess the extent of governance-related research conducted by 97 mutual fund families in 3,706 companies, over a seven-year period. Our governance measure is based on the number of times each investor accesses each firm’s proxy and proxy-related SEC filings on EDGAR, over the months leading up to the firm’s annual meeting.

Both investors’ and ISS’s governance research are significantly concentrated within larger firms, firms with poorer recent performance, and firms with more contentious items up for vote.

We find that investors are strategic in where they concentrate their governance efforts: they conduct significantly less governance research when other shareholders in the firm are more active monitors along this dimension.

Finally, we find that investors’ governance research is related to more informed voting and to changes in their investment positions.

By: Peter Iliev (Pennsylvania State University – Department of Finance), Jonathan Kalodimos (Oregon State University – College of Business) and Michelle Lowry (Drexel University)

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