Essays on corporate governance, agency conflicts, and regulations

This dissertation consists of two essays on corporate governance, agency conflicts, and regulations. In the first essay (Chapter 1), we employ a new comprehensive proxy voting records database to investigate whether mutual funds vote responsibly on a diverse range of governance, compensation and director election management- and shareholder-sponsored proposals. We hypothesize that mutual funds vote responsibly when the direction of their votes is consistent with firm performance, a proxy for effective management and board monitoring. Results show that voting is performance-related for most management and selected shareholder proposals and that it is consistent with Institutional Shareholder Services' (ISS) recommendations. We find that deviations from mutual fund family voting policies are positively related to firm performance and that mutual funds' business ties with corporations do affect their voting behavior. Overall, our study provides some evidence of responsible and accountable mutual fund voting.;On June 30, 2003, the Securities and Exchange Commission (SEC) imposed a new ruling that allows shareholders to vote on equity compensation plans. The second essay (Chapter 2) assesses whether and how this new SEC regulation affects the equity compensation proposals, shareholder voting, and compensation structure of S&P 500 firms. We show evidence of self-selection and of companies attempting to bypass the new regulation by ceasing to make amendments to existing equity compensation plans or creating new ones, thereby eliminating the need of shareholder opinion. We find that shareholders become more critical of excessive compensation packages following the implementation of the rule. Finally, the results further show that changes in compensation structure tend to involve more cash compensation, hence allowing firms to avoid putting equity plans to a shareholder vote.