Working Paper: CEPR ID: DP4192
Authors: Ernst Maug; Kristian Rydqvist
Abstract: We investigate if the proxy voting process transmits valuable information from shareholders to management. A simple strategic voting model is developed and tested in a large sample of management proposals. The evidence suggests that voting is strategic in the sense that shareholders take into account the information of the other shareholders when making their voting decisions. The structural estimation suggests that strategic voting saves up to 30% of the value at stake in a proposal compared to naive voting strategies, especially for voting on governance proposals. The data also suggest that super majority requirements are never optimal. We conclude that shareholder meetings have an advisory function in addition to the disciplining role typically emphasized in the literature.
Keywords: Information aggregation; Shareholder meeting; Sincere voting; Strategic voting; Super majority
JEL Codes: D44; G10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Super majority requirements (D72) | Inefficiency (D61) |
| Naive voting (D79) | Decrease in firm value (G32) |
| Strategic voting (D72) | Alignment with observed data (C52) |
| Strategic voting (D72) | Improvement in firm value (G32) |
| Strategic voting (D72) | Savings in value at stake (J17) |