Interim News and the Role of Proxy Voting Advice

Review of Financial Studies, Vol. 23, No. 12, 2010

36 Pages Posted: 27 Sep 2010 Last revised: 30 Dec 2010

See all articles by Cindy R. Alexander

Cindy R. Alexander

Securities and Exchange Commission (SEC)

Mark A. Chen

Georgia State University - Robinson College of Business

Duane J. Seppi

Carnegie Mellon University - David A. Tepper School of Business

Chester S. Spatt

Carnegie Mellon University - David A. Tepper School of Business

Date Written: September 20, 2010

Abstract

This paper 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 multiequation 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.

Keywords: Corporate Governance, Shareholder Voting, Proxy Contests, Proxy Advice

JEL Classification: G20, G24, G30, G34

Suggested Citation

Alexander, Cindy R. and Chen, Mark A. and Seppi, Duane J. and Spatt, Chester S., Interim News and the Role of Proxy Voting Advice (September 20, 2010). Review of Financial Studies, Vol. 23, No. 12, 2010, Available at SSRN: https://ssrn.com/abstract=1683485

Cindy R. Alexander

Securities and Exchange Commission (SEC) ( email )

Washington
United States

Mark A. Chen (Contact Author)

Georgia State University - Robinson College of Business ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Duane J. Seppi

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-2298 (Phone)
412-268-8896 (Fax)

Chester S. Spatt

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-8834 (Phone)
412-268-6689 (Fax)

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