When Shareholders Disagree: Trading After Shareholder Meetings

74 Pages Posted: 5 Jan 2018 Last revised: 7 Jul 2020

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

Hebrew University of Jerusalem - Department of Finance and Banking

Date Written: June 26, 2020

Abstract

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

Li, Sophia Zhengzi and Maug, Ernst G. and Schwartz-Ziv, Miriam, When Shareholders Disagree: Trading After Shareholder Meetings (June 26, 2020). Fifth Annual Conference on Financial Market Regulation, 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 the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Miriam Schwartz-Ziv

Hebrew University of Jerusalem - Department of Finance and Banking ( email )

Mount Scopus
Jerusalem, 91905
Israel

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