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Market reactions to proxy advisory companies’ recommendations in Japan

Author

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  • Masumoto, Kazuhide
  • Takeda, Fumiko

Abstract

This study investigates how proxy advisory companies’ recommendations affect the stock prices of target companies in Japan, whose governance system has been under transition from relationship-based to more market-based. Based on 125 voting recommendations reported in newspapers between 2003 and 2022, we find that stock prices respond to recommendations inconsistent with the board's policy more largely than to those consistent. The market reactions become larger when firms are smaller and/or have a higher shareholding ratio of foreign investors, when recommendations are against takeover defense measures, and when the firms’ name attracts investor attention.

Suggested Citation

  • Masumoto, Kazuhide & Takeda, Fumiko, 2022. "Market reactions to proxy advisory companies’ recommendations in Japan," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322005104
    DOI: 10.1016/j.frl.2022.103331
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate governance; Corporate voting; Proxy advisory firms; Market value;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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