Using ‘Mood Images’ in an Annual Report to Influence Shareholder Say-on-Pay Votes

Abstract

We examine whether mood images—cosmetic and information-free graphical elements—in an annual report influence shareholder votes on the say-on-pay (SOP) proposals. Consistent with the cognitive dissonance theory, we find that on average mood images promote heuristic decision making and increase shareholder voting support for SOP proposal. However, in the presence of signals conflicting managers’ proposal, such as a proxy advisor’s investigation of the firm, mood images prompt a more critical evaluation of the SOP resolution by shareholders, which negates their positive effect on SOP resolution support. Our findings reveal the contingent nature of the effect mood images have on shareholder voting behavior.

Keywords: mood image, shareholder vote, proxy advisor, cognitive dissonance

JEL Classification: D72, G18, G38, M12