Operational Proximity and Cross-Border Shareholder Monitoring

Using US mutual funds' international voting records, we investigate whether proximity to firm operations promotes active monitoring by foreign investors. To identify monitoring effects, we exploit variations in proximity arising from existing portfolio firms' actions. We find that after a non-US firm expands operations into the US, US funds cast more dissenting votes at the firm's shareholder meetings, especially in response to poor performance and close-call proposals. The increase in dissent voting is consistent with funds becoming more engaged shareholders as they gain better information. Our findings suggest that cross-border economic activities facilitate the global dissemination of best-practice shareholder activism.