Trust and Shareholder Voting
72 Pages Posted: 22 Jul 2018 Last revised: 14 Sep 2019
Date Written: August 27, 2019
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: Suggested Citation