Trust and Shareholder Voting

67 Pages Posted: 22 Jul 2018 Last revised: 12 Mar 2019

See all articles by Simon Lesmeister

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: February 19, 2019

Abstract

We test the hypothesis whether a specific aspect of culture – trust in others – affects shareholder voting by substituting for costly monitoring. We find consistent evidence that the percentage of votes cast at shareholder meetings is lower in high-trust countries (and U.S. counties) while the percentage of votes in support of management proposals is higher. Shocks to trust and IV regressions confirm these results. We also find that shareholder voting is more valuable in low-trust countries, as reflected by a more positive effect on firm performance, which suggests that managers do not exploit lower levels of monitoring 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 (February 19, 2019). 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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