Influence of Public Opinion on Investor Voting and Proxy Advisors

Aggarwal, Reena; Erel, Isil; Starks, Laura T.

doi:10.2139/ssrn.2447012

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Influence of Public Opinion on Investor Voting and Proxy Advisors

Fisher College of Business Working Paper No. WP 2014-03-12

Georgetown McDonough School of Business Research Paper No. 2447012

Dice Center Working Paper No. 2014-12

42 Pages Posted: 8 Jun 2014 Last revised: 21 Aug 2015

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Isil Erel

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Laura T. Starks

University of Texas at Austin - Department of Finance; European Corporate Governance Institute (ECGI)

Date Written: July 1, 2015

Abstract

Institutional investors vote corporate proxies on behalf of underlying investors and beneficiaries. We show a strong relation between this voting and public opinion on corporate governance (as reflected in media coverage and surveys), with similarly strong results for voting by mutual funds. We also find that proxy advisors’ recommendations are associated with public opinion. Our results suggest that institutional investors and proxy advisors pay attention to the changing opinions of their beneficiaries and shareholders, as reflected in their voting decisions, and that the proxy voting process serves as a channel for the public to influence corporate behavior.

Keywords: Public Opinion, Media, Proxy Advisors, Institutional Investors, Proxy Voting

JEL Classification: G32, G34, G38

Suggested Citation: Suggested Citation

Aggarwal, Reena and Erel, Isil and Starks, Laura T., Influence of Public Opinion on Investor Voting and Proxy Advisors (July 1, 2015). Fisher College of Business Working Paper No. WP 2014-03-12, Georgetown McDonough School of Business Research Paper No. 2447012, Dice Center Working Paper No. 2014-12, Available at SSRN: https://ssrn.com/abstract=2447012 or http://dx.doi.org/10.2139/ssrn.2447012