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Interim News and the Role of Proxy Voting Advice

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

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.

Suggested Citation

  • Cindy R. Alexander & Mark A. Chen & Duane J. Seppi & Chester S. Spatt, 2010. "Interim News and the Role of Proxy Voting Advice," Review of Financial Studies, Society for Financial Studies, vol. 23(12), pages 4419-4454, December.
  • Handle: RePEc:oup:rfinst:v:23:y:2010:i:12:p:4419-4454
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    1. Larcker, David F. & McCall, Allan L. & Ormazabal, Gaizka, 2013. "Proxy advisory firms and stock option repricing," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 149-169.
    2. Brochet, Francois & Srinivasan, Suraj, 2014. "Accountability of independent directors: Evidence from firms subject to securities litigation," Journal of Financial Economics, Elsevier, vol. 111(2), pages 430-449.
    3. Fos, Vyacheslav & Tsoutsoura, Margarita, 2014. "Shareholder democracy in play: Career consequences of proxy contests," Journal of Financial Economics, Elsevier, vol. 114(2), pages 316-340.
    4. Ferri, Fabrizio & Oesch, David, 2013. "Management Influence on Investors: Evidence from Shareholder Votes on the Frequency of Say on Pay," Working Papers on Finance 1329, University of St. Gallen, School of Finance.
    5. Becht, Marco & Franks, Julian R & Grant, Jeremy & Wagner, Hannes, 2015. "The Returns to Hedge Fund Activism: An International Study," CEPR Discussion Papers 10507, C.E.P.R. Discussion Papers.
    6. repec:oup:rfinst:v:29:y:2016:i:12:p:3394-3427. is not listed on IDEAS
    7. repec:eee:corfin:v:44:y:2017:i:c:p:405-424 is not listed on IDEAS
    8. Ertimur, Yonca & Ferri, Fabrizio & Maber, David A., 2012. "Reputation penalties for poor monitoring of executive pay: Evidence from option backdating," Journal of Financial Economics, Elsevier, vol. 104(1), pages 118-144.
    9. Stephen G. Dimmock & William C. Gerken & Zoran Ivković & Scott J. Weisbenner, 2014. "Capital Gains Lock-In and Governance Choices," NBER Working Papers 20176, National Bureau of Economic Research, Inc.

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