| This dissertation consists of two essays on corporate governance. The first essay (Chapter 1) finds evidence that corporate governance mechanisms matter for mutual funds, especially funds with better governance standards. Using new and unexplored mutual fund governance data, we show that corporate governance mechanisms play a role in both the investment decisions and the monitoring efforts of mutual funds. Mutual funds, in general, tend to tilt their portfolios toward firms with strong corporate governance, and this is more evident in funds with good governance practices. We further find that corporate governance also affects fund proxy voting decisions. Such voting decisions are indicative of the funds' efforts aimed at monitoring corporate activities, hence supporting mutual fund activism. Funds with better governance tend to vote with Institutional Shareholder Services' negative recommendations, but against management's recommendations on management-sponsored proposals relating to antitakeover, board quality, and director election. Overall, our evidence suggests that well-governed, while not poorly-governed, mutual funds do perform their fiduciary duties and act in the interests of their shareholders.;The second essay (Chapter 2) investigates whether product market competition acts as an external mechanism for disciplining management and also whether there is any relationship between the degree of competition a firm faces and its corporate governance. We find that firms in competitive industries or with low market power tend to have weak corporate governance structures. Results are robust to various competition measures at the firm and industry levels, and even after controlling for firm-specific variables. We further find that corporate governance quality has a significant effect on performance only when product market competition is weak. The overall evidence suggests that product market competition has a substantial impact on corporate governance and that it substitutes for corporate governance quality. Finally, we provide evidence that the disciplinary force of competition on management is from the fear of liquidation. |
