Interim News and the Role of Proxy Voting Advice

Cindy R. Alexander · Mark A. Chen · Duane J. Seppi · Chester S. Spatt

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Corporate Finance and Governance Financial Markets and Investment Strategies Auditing, Earnings Management, Governance

Abstract

This article examines the information content and consequences of third-party voting advice that arrives as news at an interim stage in corporate proxy contests. We first document significant stock returns around announcements of proxy vote recommendations. We then develop a multi-equation empirical procedure for disentangling the price impact of prediction effects (changes in contest outcome probabilities) from the price impact of certification effects (changes in outcome-contingent valuations). Both effects are present in the data: Voting advice is both predictive about contest outcomes and informative about the ability of dissidents to add value. Consequently, proxy advice plays a dual informational role. , Oxford University Press.

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References

2001Econometric Analysis of Cross Section and Panel Data 1980Takeover Bids, The Free-Rider Problem, and the Theory of the Corporation 1983The Structure of Ownership and the Theory of the Firm 2000Corporate governance proposals and shareholder activism: the role of institutional investors 1988Ownership structure and voting on antitakeover amendments 1988One share-one vote and the market for corporate control 1988Proxy contests and the efficiency of shareholder oversight 2003Voting with their feet: institutional ownership changes around forced CEO turnover

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2017Does corporate social responsibility create shareholder value? The importance of long-term investors 2014Shareholder democracy in play: Career consequences of proxy contests 2011The Disciplinary Effects of Proxy Contests 2017Understanding Uncontested Director Elections 2019Proxy Advisory Firms: The Economics of Selling Information to Voters 2017

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