When Shareholders Disagree: Trading After Shareholder Meetings

73 Pages Posted: 5 Jan 2018 Last revised: 31 Jan 2019

See all articles by Sophia Zhengzi Li

Sophia Zhengzi Li

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Ernst G. Maug

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

Miriam Schwartz-Ziv

Michigan State University - Department of Finance

Date Written: January 27, 2019

Abstract

This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Mutual funds in our sample sell, or buy less, if their votes are opposed to the voting outcome, independently of whether funds oppose or support management. Trading volume peaks at the meeting date and remains at elevated levels up to four weeks after shareholder meetings; it is higher even when stock prices do not change. These findings are difficult to reconcile with models in which shareholders trade because of differences in information. We explore recently-published models of trading based on disagreement and differences of opinions, which offer sharp predictions on the relationships between volume, volatility, and the autocorrelations of volume. We find strong support for these models in the data, and little to support models in which voting aggregates information. We conclude that shareholders disagree when they vote at meetings, and their beliefs may diverge even more strongly after the meeting. 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

Li, Sophia Zhengzi and Maug, Ernst G. and Schwartz-Ziv, Miriam, When Shareholders Disagree: Trading After Shareholder Meetings (January 27, 2019). Fifth Annual Conference on Financial Market Regulation; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 594/2019. Available at SSRN: https://ssrn.com/abstract=3095745 or http://dx.doi.org/10.2139/ssrn.3095745

Sophia Zhengzi Li

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

100 Rockafeller Rd
Piscataway, NJ 08854
United States

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

Miriam Schwartz-Ziv

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI MICHIGAN 48824-1122
United States
8573127793 (Phone)
8573127793 (Fax)

HOME PAGE: http://miriamschwartzziv.wix.com/mysite

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