Thy Neighbor's Vote: Peer Effects in Proxy Voting

50 Pages Posted: 26 Nov 2019

See all articles by Jiekun Huang

Jiekun Huang

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: November 6, 2019

Abstract

Institutional investors' proxy voting decisions are influenced by their neighbors. I identify peer effects in proxy voting by exploiting the variation in the voting behavior of publicly traded financial institutions induced by close-call votes on shareholder-sponsored governance proposals at these institutions. I first show that the passage of a close vote at a focal institution increases the likelihood that the focal institution votes against management. Using a triple-differences approach, I find that passing a close vote at a focal institution increases the likelihood that its neighboring institutions vote against management in stocks that are heavily held by the focal institution. This effect is particularly strong when the proposal up for a vote is contentious. I further show that peer effects in voting behavior at the institution level have aggregate effects on actual vote outcomes. 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

Huang, Jiekun, Thy Neighbor's Vote: Peer Effects in Proxy Voting (November 6, 2019). Available at SSRN: https://ssrn.com/abstract=3481315 or http://dx.doi.org/10.2139/ssrn.3481315

Jiekun Huang (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://www.huangjk.info

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