1. Discussant: Pei-Gi Shu
Comment on “Shareholder Voting Rights and Mutual Fund Trading in Takeovers”
Discussant: Pei-Gi Shu

2. Summary:
Mutual fund managers value their voting rights in firms and exhibit different trading patterns between M&A deals with and without voting rights: they are net buyers in offers with voting rights and net sellers in offers without voting rights.
The difference in trading is more pronounced in low-value acquisitions.
Both voting rights and mutual fund trading affect the probability of deal completion.

3. Merits of this paper
To find a natural experiment to investigate the value of voting rights: acquisitions that are within 20-percent rule might be exempt from the surveillance of existing shareholders.
To investigate the joint impact of “voting with ballots” and “voting with feet” on the eventual consequence of takeovers.
The empirical results are robust to various model specifications and controls.

4. Comments
Why would mutual funds net purchase the low-value M&As in the first place? What would be the potential benefits for these mutual funds to net buy the cum-voting shares? Why would they bother to get involved in and prevent the completion of poor deals rather than just dump these shares in the first place? A comparison between the buy-and-stop payoff and dumping-share payoff of the poor-quality acquisitions might help to justify why mutual funds would get involved in, exert their voting rights on, and stop the poor-quality deals.

5. Comments
Using mutual fund trade in aggregation might fail to capture possible heterogeneity among individual funds. Further comparisons of funds with different characteristics might help. For example, voting rights might be more valuable to active, long-term, large-position funds than their inactive, short-term , and small-position counterparts.

6. Comments
The claim of voting with their feet might be too strong, according to the statistics in Table 2 and 3. The net trades could be defined alternatively as an adjustment of prior trades rather than an adjustment of the trades of cross sectional stocks bearing similar characteristics.

7. Comments
Since mutual fund trade is dictated by voting rights, the logistic analysis in Table 8 could include residual trade with the expected trade that is firstly estimated by voting rights.

8. Comments
Misplacement of the column labels in Table 2: It should be “Vote” and “No-Vote” in Panel A and “No-Vote” and “Vote” in Panel B.
The trading patterns for “Cash” (which implies “No-Vote”) and for “Vote” are insignificantly different (Table 2). Is this somewhat inconsistent with the valuing-voting-rights hypothesis?