Investor Ideology

36 Pages Posted: 14 Feb 2018 Last revised: 31 Mar 2018

Patrick Bolton

Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Enrichetta Ravina

Kellogg School of Management

Howard Rosenthal

New York University

Date Written: March 1, 2018

Abstract

This paper analyzes the voting patterns of institutional investors from their proxy voting records. It estimates a spatial model of voting, using the W-NOMINATE scaling for voting in legislatures. We find that institutional investors’ ideology (or ideal points) can be mapped onto a left-right dimension, just as legislators’ ideologies can be represented along a left-right spectrum. The far-left investors are socially responsible investors and the far-right investors are “greedy” investors, those opposed to proposals that could financially cost shareholders. There are significant ideological differences across institutional investors and there is no shareholder unanimity. The proxy adviser Institutional Shareholder Services (ISS) plays a role similar to a political party. A second adviser, Glass Lewis, has fewer followers. We find that the ideology of ISS is center-left, to the left of most institutional investors and Glass Lewis. Furthermore, Vanguard and Blackrock are center-right, and the ideology reflected in management proposals and voting recommendations is far to the right. Investors on the left support a more social orientation of the firm on environmental and other issues. They also support fewer executive compensation proposals.

Keywords: Institutional Investors, Proxy Voting, Ideal Points, Spatial Model of Voting

JEL Classification: G23, G30, D72

Suggested Citation

Bolton, Patrick and Li, Tao and Ravina, Enrichetta and Rosenthal, Howard, Investor Ideology (March 1, 2018). Columbia Business School Research Paper No. 18-21; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 557/2018. Available at SSRN: https://ssrn.com/abstract=3119935 or http://dx.doi.org/10.2139/ssrn.3119935

Patrick Bolton (Contact Author)

Columbia Business School - Department of Economics ( email )

420 West 118th Street
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Enrichetta Ravina

Kellogg School of Management ( email )

Evanston, IL 60208
United States
8474676872 (Phone)

HOME PAGE: http://https://sites.google.com/view/eravina/home

Howard Rosenthal

New York University ( email )

19 W 4th St
New York, NY New York 10012
United States
4155199591 (Phone)
4155199591 (Fax)

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