Thy Neighbor's Vote: Peer Effects in Proxy Voting
Management Science (2023) 69, 3759-4361
56 Pages Posted: 26 Nov 2019 Last revised: 16 Jan 2024
Date Written: August 21, 2022
Abstract
Institutional investors' proxy voting decisions are influenced by their neighbors. I identify peer effects in proxy voting using close-call votes on shareholder-sponsored governance proposals at publicly traded financial institutions (focal institutions). I first show that the passage of a governance proposal at a focal institution makes the institution more likely to vote against management at its portfolio firms. Using a triple-difference approach, I find that the neighboring institutions of the focal institution that passes a governance proposal become more likely to vote against management in stocks that are heavily held by the focal institution. These results suggest that peer influence is an important determinant of proxy voting behavior.
Keywords: Peer effects, Proxy voting, Institutional investors, Geography, Corporate governance
JEL Classification: G23, G32, G34
Suggested Citation: Suggested Citation