Do Shareholders Vote Strategically? Voting Behavior, Proposal Screening, and Majority Rules

Posted: 17 Jan 2009

See all articles by Ernst G. Maug

Ernst G. Maug

University of Mannheim Business School; European Corporate Governance Institute (ECGI)

Kristian Rydqvist

State University of New York at Binghamton - School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2009

Abstract

We analyze how shareholders screen management proposals at annual general meetings. First, we use a simple model of strategic voting to develop a theoretical benchmark of effective information aggregation through voting. Then, we derive testable implications and provide structural estimates of the model parameters. The main conclusions are that shareholders vote strategically and that proposal screening increases value. Shareholders largely neutralize the lock-in effect of supermajority rules, thereby preventing the incorrect rejection of proposals.

Keywords: D72, G34

Suggested Citation

Maug, Ernst G. and Rydqvist, Kristian, Do Shareholders Vote Strategically? Voting Behavior, Proposal Screening, and Majority Rules (January 2009). Review of Finance, Vol. 13, Issue 1, pp. 47-79, 2009. Available at SSRN: https://ssrn.com/abstract=1328781 or http://dx.doi.org/rfn026

Ernst G. Maug (Contact Author)

University of Mannheim Business School ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181-1952 (Phone)

HOME PAGE: http://cf.bwl.uni-mannheim.de/de/people/maug/

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Kristian Rydqvist

State University of New York at Binghamton - School of Management ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States
607-777-2673 (Phone)
607-777-4422 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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