Trust and Shareholder Voting

55 Pages Posted: 22 Jul 2018  

Simon Lesmeister

University of Cologne - Centre for Financial Research (CFR)

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Date Written: July 19, 2018

Abstract

We test the hypothesis that a specific aspect of culture – trust in others – affects shareholder voting behavior as it lowers investors’ concerns of being expropriated. We find consistent evidence that the percentage of votes cast at shareholder meetings is lower in high-trust countries while the percentage of votes in support of management is higher. Shocks to trust and IV regressions support this result. We also find that shareholder voting is more valuable in low-trust countries, as reflected by a more positive effect on future firm performance, which suggests that managers exploit low levels of monitoring less when trust is high.

Keywords: Culture, Monitoring, Shareholder expropriation, Shareholder voting, Trust

JEL Classification: G3, G19, G32

Suggested Citation

Lesmeister, Simon and Limbach, Peter and Goergen, Marc, Trust and Shareholder Voting (July 19, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 569/2018. Available at SSRN: https://ssrn.com/abstract=3216765 or http://dx.doi.org/10.2139/ssrn.3216765

Simon Lesmeister

University of Cologne - Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

Peter Limbach

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

Marc Goergen (Contact Author)

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

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

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

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