Uncertainty, Information, and Shareholder Democracy: Evidence from Voting on Shareholder Proposals

Abstract

An integral aspect of shareholder democracy is the shareholder proposal process, through which shareholders can pressure firms to make changes. We find that shareholders’ uncertainty about the firm reduces their participation in voting on shareholder proposals and also reduces the likelihood of the proposals’ passage and implementation. In further analyses, we find that the negative effects of uncertainty on the shareholder proposal process are mitigated when there is comparable peer information and more information intermediation. Overall, our paper provides new insight into the role of shareholder uncertainty and the information environment in a shareholder democracy.

Keywords: shareholder activism, shareholder proposals, peer information

JEL Classification: M41