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red proposals, there is no significant difference in voting support between mutual fund families with ties and mutual fund families without ties. However, for management proposals opposed by the ISS, I find that the percentage of voting support in mutual fund families with pension ties accounts for 32.7 % of the proposals while fund families without pension ties accounts for 22.6 % of the proposals. In order words, voting with management of mutual funds with pension ties is significantly greater than that of mutual funds without pension ties for the ISS unfavorable management sponsored proposals. As discussed, to the extent that shareholders are likely to consider ISS unfavorable management proposals as value reducing, management may ask affiliated institutional investors such as mutual funds managing their pension plans to support it in order to win a victory. Likewise, management may pressure its trustees of pension plans not to support shareholder proposals as shareholders are likely to consider the ISS favorable shareholder proposals as value improvement. Consistent with this hypothesis, when the ISS recommends passage of a shareholder proposal, fund families with pension ties vote with management 31.5 % of the time while fund families without pension ties vote with management 28.1% of the time, and the difference is statistically significant.

Table 5 is the main analysis of this study. As the finding thatSince previous studies have found that firm size, prior performance, institutional holdings, and corporate governance affect the behavior of institutional investors, I include these factors as control variables. The dependent variable is one if the percentage of voting support for management is equal to or more than 50%; otherwise it is zero. The independent variable equals one if a fund family has business ties with the firm in which they invest and is thereforeso eligible to cast their votes; otherwise it is zero. As the dependent variable is the indicator variable, I use a probit model to examine whether pension business ties of mutual fund families affect mutual fund voting behavior.

The coefficient estimates of Table 5 present marginal effects of independent variables. I begin by examining whether there is a relation between the likelihood that a fund family votes with management and business ties. As shown in column (1) of Table 5, the marginal effect of the pension ties is negatively significant for the ISS favorable management proposal, indicating pension ties decrease the probability that fund families support management by 11.3%. Although this result opposes the hypothesis that mutual funds are more likely to vote with management in order to attract assets from pension inflows, it is not surprising. Suppose that there are two different management proposals: one is recommended by ISS and the other is not recommended. To the extent that shareholders are more likely to vote for the ISS favorable proposal compared to for the ISS unfavorable proposal, the probability that the former proposal is passed is greater than the latter. Therefore, the managers need to exert more effort in order to pass the ISS unfavorable proposal by contacting its affiliated shareholders such as mutual funds managing their pension plans. As expected, for the ISS unfavorable proposals in column (2) of Table 5, there is a strong positive relationship between business ties and voting support of fund families. This indicates