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Do Shareholders vote Strategically? Evidence on the Advisory Role of Annual General Meetings

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Author Info
Maug, Ernst
Rydqvist, Kristian
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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4192.

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Date of creation: Jan 2004
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Handle: RePEc:cpr:ceprdp:4192

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Related research
Keywords: information aggregation shareholder meeting sincere voting strategic voting super majority

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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References listed on IDEAS
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  1. Brickley, James A. & Lease, Ronald C. & Smith, Clifford Jr., 1988. "Ownership structure and voting on antitakeover amendments," Journal of Financial Economics, Elsevier, vol. 20, pages 267-291. [Downloadable!] (restricted)
  2. repec:rus:hseeco:72155 is not listed on IDEAS
  3. McWilliams, Victoria B, 1990. " Managerial Share Ownership and the Stock Price Effects of Antitakeover Amendment Proposals," Journal of Finance, American Finance Association, vol. 45(5), pages 1627-40, December. [Downloadable!] (restricted)
  4. Partch, M. Megan, 1987. "The creation of a class of limited voting common stock and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 18(2), pages 313-339, June. [Downloadable!] (restricted)
  5. Brickley, James A. & Lease, Ronald C. & Smith, Clifford Jr., 1994. "Corporate voting: Evidence from charter amendment proposals," Journal of Corporate Finance, Elsevier, vol. 1(1), pages 5-31, March. [Downloadable!] (restricted)
  6. Karpoff, Jonathan M. & Malatesta, Paul H. & Walkling, Ralph A., 1996. "Corporate governance and shareholder initiatives: Empirical evidence," Journal of Financial Economics, Elsevier, vol. 42(3), pages 365-395, November. [Downloadable!] (restricted)
  7. DeAngelo, Harry & Rice, Edward M., 1983. "Antitakeover charter amendments and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 329-359, April. [Downloadable!] (restricted)
  8. Strickland, Deon & Wiles, Kenneth W. & Zenner, Marc, 1996. "A requiem for the USA Is small shareholder monitoring effective?," Journal of Financial Economics, Elsevier, vol. 40(2), pages 319-338, February. [Downloadable!] (restricted)
  9. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
    Other versions:
    • Timothy J. Feddersen & Wolfgang Pesendorfer, 1995. "The Swing Voter's Curse," Discussion Papers 1064, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  10. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution," American Economic Review, American Economic Association, vol. 92(5), pages 1448-1471, December. [Downloadable!] (restricted)
  11. Becht, Marco & Bolton, Patrick & Roell, Ailsa, 2003. "Corporate governance and control," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 1, pages 1-109 Elsevier. [Downloadable!] (restricted)
    Other versions:
  12. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution?," NajEcon Working Paper Reviews 391749000000000536, www.najecon.org. [Downloadable!]
  13. Linn, Scott C. & McConnell, John J., 1983. "An empirical investigation of the impact of `antitakeover' amendments on common stock prices," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 361-399, April. [Downloadable!] (restricted)
  14. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
    Other versions:
  15. Jennifer E. Bethel & Stuart L. Gillan, 2002. "The Impact of the Institutional and Regulatory Environment on Shareholder Voting," Financial Management, Financial Management Association, vol. 31(4), Winter.
  16. Danielson, Morris G. & Karpoff, Jonathan M., 1998. "On the uses of corporate governance provisions," Journal of Corporate Finance, Elsevier, vol. 4(4), pages 347-371, December. [Downloadable!] (restricted)
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