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Investors’ Attention to Corporate Governance
[The “Wall Street Walk” and shareholder activism: Exit as a form of voice]

Author

Listed:
  • Peter Iliev
  • Jonathan Kalodimos
  • Michelle Lowry

Abstract

Using unique data on investor views of EDGAR company filings, we document that many investors engage in governance research. However, investors’ monitoring is disproportionately focused on large firms and firms with meetings outside the busy spring proxy season. Using an instrumental variables approach that isolates the drop in governance attention during the busy proxy season, we show that governance research is related to investors’ monitoring of firms, through voice and exit. Moreover, governance research disciplines management, who, as a result, reduce investments and increase payouts. The concentration of attention results in joint monitoring of a relatively small subset of firms.

Suggested Citation

  • Peter Iliev & Jonathan Kalodimos & Michelle Lowry, 2021. "Investors’ Attention to Corporate Governance [The “Wall Street Walk” and shareholder activism: Exit as a form of voice]," The Review of Financial Studies, Society for Financial Studies, vol. 34(12), pages 5581-5628.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:12:p:5581-5628.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab003
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    Cited by:

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    2. Dasgupta, Amil & Fos, Vyacheslav & Sautner, Zacharias, 2021. "Institutional investors and corporate governance," LSE Research Online Documents on Economics 112114, London School of Economics and Political Science, LSE Library.
    3. Chen, Shenglan & Ma, Hui & Wu, Qiang & Zhang, Hao, 2023. "Does common ownership constrain managerial rent extraction? Evidence from insider trading profitability," Journal of Corporate Finance, Elsevier, vol. 80(C).
    4. Ilya Ivaninskiy & Irina Ivashkovskaya, 2022. "Are blockchain-based digital transformation and ecosystem-based business models mutually reinforcing? The principal-agent conflict perspective," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 643-670, December.
    5. Paul Brockman & Dennis Y Chung & Neal M Snow, 2023. "Search-Based Peer Groups and Commonality in Liquidity," Review of Finance, European Finance Association, vol. 27(1), pages 33-77.
    6. Schwartz-Ziv, Miriam & Wermers, Russ, 2022. "Do institutional investors monitor their large-scale vs. small-scale investments differently? Evidence from the say-on-pay vote," Journal of Banking & Finance, Elsevier, vol. 141(C).
    7. Kristopher Gerardi & Michelle Lowry & Carola Schenone, 2023. "A Critical Review of the Common Ownership Literature," FRB Atlanta Working Paper 2023-17, Federal Reserve Bank of Atlanta.
    8. Lohmann, Christian & Möllenhoff, Steffen, 2023. "Dark premonitions: Pre-bankruptcy investor attention and behavior," Journal of Banking & Finance, Elsevier, vol. 151(C).

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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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