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The proxy advisory industry: Influencing and being influenced

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  • Shu, Chong

Abstract

This paper develops two new methods to infer a mutual fund's proxy advisors from SEC filings. It then applies these methods to characterize features of the proxy advice industry from 2007 to 2021: (i) As of 2021, ISS and Glass Lewis collectively control approximately 90 percent of the market. During this period, the market share of ISS remains stable, while that of Glass Lewis has increased. (ii) When a proxy advisor issues a recommendation opposing management, its customers are approximately 20 percentage points more likely to also oppose management compared to other investors. (iii) Funds that subscribe to both proxy advisors tend to vote more similarly to the recommendations of the advisor whose voting platform they use. (iv) Proxy advisors often change their advisory stance when investors disagree with their previous advice. I offer suggestive evidence that this adaptation reflects both learning from informed investors and a desire by proxy advisors to align with the preferences of their customers.

Suggested Citation

  • Shu, Chong, 2024. "The proxy advisory industry: Influencing and being influenced," Journal of Financial Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:jfinec:v:154:y:2024:i:c:s0304405x24000333
    DOI: 10.1016/j.jfineco.2024.103810
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    References listed on IDEAS

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    Cited by:

    1. Michele Fioretti & Victor Saint-Jean & Simon C. Smith, 2024. "NGO Activism: Exposure vs. Influence," Papers 2411.06875, arXiv.org, revised Nov 2024.
    2. Miyachi, Hiroaki & Takeda, Fumiko, 2024. "Empirical study on voting results and proxy advisor recommendations in Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).

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    More about this item

    Keywords

    Proxy advisor; Corporate voting; Robo voting; Shareholder rights;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G40 - Financial Economics - - Behavioral Finance - - - General

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