Trust and Shareholder Voting

72 Pages Posted: 22 Jul 2018 Last revised: 14 Sep 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: August 27, 2019

Abstract

We show that in countries with more societal trust shareholders cast fewer votes at shareholder meetings and are more supportive of management proposals. This result is confirmed by shocks to trust and instrumental variables. It also holds at the U.S.-county level and for U.S. institutional investor voting on management proposals. Further, low shareholder participation and less dissent voting relate less negatively to future firm performance in high-trust countries, suggesting that managers do not exploit lower monitoring levels when trust is high. Our evidence supports theory according to which trust substitutes for monitoring and has implications for investors’ optimal voting effort.

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 (August 27, 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 the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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

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