Thy Neighbor's Vote: Peer Effects in Proxy Voting
48 Pages Posted: 26 Nov 2019 Last revised: 30 Jan 2021
Date Written: January 30, 2021
Institutional investors' proxy voting decisions are influenced by their neighbors. I identify peer effects in proxy voting using close-call votes on shareholder-sponsored governance proposals at publicly traded financial institutions (focal institutions). I first show that the passage of a close vote at a focal institution increases the likelihood that the institution votes against management. Using a triple-difference approach, I find that the passage increases the likelihood that the neighboring institutions vote against management in stocks that are heavily held by the focal institution. These results suggest that peer influence is an important determinant of proxy voting behavior.
Keywords: Peer effects, Proxy voting, Institutional investors, Geography, Corporate governance
JEL Classification: G23, G32, G34
Suggested Citation: Suggested Citation