When Shareholders Disagree: Trading After Shareholder Meetings

81 Pages Posted: 5 Jan 2018 Last revised: 28 Jun 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

Hebrew University of Jerusalem - Department of Finance and Banking; 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. 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 at the meeting date, and remains high up to four weeks after shareholder meetings. 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 differences of opinion, 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 for models in which voting aggregates information. We conclude that shareholders disagree when they vote at meetings. 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

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

Mount Scopus
Jerusalem, 91905
Israel

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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