Exporting corporate governance: Do foreign and local proxy advisors differ?

European regulators are concerned that US-based proxy advisors might export US corporate governance by not considering sufficiently the unique aspects of the local setting. In contrast, local proxy advisors are expected to have a deeper understanding of the local setting. Using the German setting, we examine the pattern and the impact of shareholder voting recommendations by foreign (ISS, Glass Lewis) and local (IVOX) proxy advisors. First, we find that the voting recommendations diverge more between foreign and local proxy advisors than among foreign proxy advisors. Second, we document that against-recommendations by the local proxy advisor have an incremental impact on voting outcomes even after controlling for the voting recommendations by foreign proxy advisors. Third, we observe that the impact of the voting recommendations on voting outcomes increases with a higher proportion of institutional investors. Dividing the proportion into foreign and local institutional investors reveals that against-recommendations by foreign proxy advisors influence the voting decisions of both groups similarly. Overall, our study provides novel evidence that the informational contents of voting recommendations by foreign and local proxy advisors differ, implying that foreign proxy advisors may not fully integrate unique aspects of the local setting in their voting recommendations.