When Shareholders Disagree: Trading After Shareholder Meetings
74 Pages Posted: 5 Jan 2018 Last revised: 7 Jul 2020
Date Written: June 26, 2020
This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Using data on daily trades, we find that mutual funds reduce their holdings if their votes are opposed to the voting outcome. Trading volume is high even when stock prices do not change, peaks on the meeting date, and remains high up to four weeks after shareholder meetings. To interpret these findings, we explore models based on differences of opinion, which predict that shareholders’ beliefs diverge more after observing voting outcomes and offer sharp predictions on the relationship between volume and volatility. We find strong support for these predictions in the data. Hence, trading after-meetings creates a shareholder base with more homogeneous beliefs. We argue that these findings have important implications for corporate governance.
Keywords: Shareholder Meetings, Voting, Disagreement, Trading, Volume
JEL Classification: G11, G12, G14, G30, G40
Suggested Citation: Suggested Citation