Shareholder Voting and Corporate Governance Around the World

Abstract:     
There is significant debate as to whether the shareholder voting process is an effective way to exercise corporate governance. Using a sample of 7,975 companies across 42 countries, we investigate whether the votes cast by U.S. institutional investors for director elections, as well as subsequent director turnover, are consistent with an effective shareholder voting process. We find that shareholders vote against directors more often when country-level investor protection is low or firm-level managerial entrenchment is high, indicating that investors exercise dissent voting when they fear expropriation the most. Further, greater voting against directors is associated with greater director turnover, indicating that shareholder votes cast have a governance-related outcome. We conclude that shareholder voting is an effective channel through which corporate governance is exercised in firms across the world.

Number of Pages in PDF File: 42

Keywords: Corporate Governance, Voting, Insider Control, Shareholder Protection, Institutional Investors

JEL Classification: D7, F30, G15, G32, G34, K22

working papers series