Trust and Shareholder Voting
67 Pages Posted: 22 Jul 2018 Last revised: 12 Mar 2019
Date Written: February 19, 2019
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: Suggested Citation