Electronic Proxy Statement Dissemination and Shareholder Monitoring

Abstract

This study examines how the means of disseminating proxy statements affects shareholder monitoring. I exploit the staggered implementation of a regulatory change that allows firms to switch from postal mail to electronic distribution, and estimate that electronic dissemination reduces total voting participation by about 1% to 2%. Under the plausible assumption that all shareholder non-participation is from retail investors, my results imply that retail investor voting non-participation increases by approximately 7% to 17% with electronic distribution. The reduction in retail investor participation shifts routine voting outcomes in favor of management’s recommendations and shift voting outcomes against for non-routine votes. Consistent with management understanding the importance of dissemination channels, I further show management strategically uses its discretion over the choice of the proxy statement dissemination channel to affect voting.

Keywords: notice and access, e-proxy, securities regulation, dissemination, corporate goverance

JEL Classification: G24, G34, G38, M41