Do Shareholder Meetings Matter? Evidence from the Options Market

Abstract

This paper examines the value and timing of information released during shareholder meetings using options. In contrast to studies that report insignificant market reactions around these meetings, we provide evidence that shareholder meetings indeed matter. We find that option implied volatility peaks around the record date and then gradually declines leading up to the meeting date. This indicates that financial market participants continuously learn information on meeting agendas and voting outcomes over the entire meeting cycle, rather than reacting on specific event dates. This decline is quantitatively substantial at 0.9%, varies by proposal topic and contentiousness level, and persists after controlling for voting premiums and borrowing fees. Our results imply that previous studies may have underestimated the importance of shareholder meetings by relying solely on event returns.

Keywords: shareholder meetings; shareholder proposals; management proposals; implied volatility; record date

JEL Classification: G14, G30, G34