The same fund family may sponsor both passive and active funds. Due to the funds’ different fee structures and flow sensitivity to performance, this may create conflicts of interest at the fund family level. Using portfolio firms’ mergers and acquisitions as a laboratory, I show that fund families actively take measures to improve the performance of their active funds by using their passive funds. When the family’s active funds have a large stake in the acquirer, passive fund owners of the target are less likely to support takeover deals that benefit target shareholders. At the deal level, I do not find evidence that takeover premia are affected by passive funds’ voting. Consistent with the argument that family profit motives drive fund performance, I observe differences in the flow-to-performance sensitivity between active and passive funds. The evidence suggests that fund families may take measures to boost their active funds’ performance at the expense of their passive funds.

Independent directors are valuable because they do not suffer from the agency costs that afflict executive directors. Independent directors also operate at an informational disadvantage compared with executive directors, which makes it hard for them to carry out their duties of advising and monitoring, and thus affects their value. I test the impact of the cost of information acquisition on board structure by exploiting a change in an accounting standard that forced US public firms to be more transparent about their operations. Analysts’ forecasts subsequently became more precise and less dispersed for the firms more affected, suggesting that the cost of information acquisition has decreased. Consistent with independent directors’ greater value, I document an increase in appointed independent directors. Cross-sectional tests suggest that independent directors are more valuable because of their improved monitoring capacity, as opposed to their advising capacity. Robustness tests using alternative data sources do not confirm the findings. Implications are discussed.