When Shareholders Disagree: Trading After Shareholder Meetings
73 Pages Posted: 5 Jan 2018 Last revised: 31 Jan 2019
Date Written: January 27, 2019
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: Suggested Citation