Public Sentiment Decomposition and Shareholder Actions 

Abstract

Employing a novel approach with unique data on public sentiment and a new metric on shareholder concerns, we establish an association between shareholder actions and public sentiment about a firm. The number of shareholder proposals effectively captures investor dissatisfaction, particularly since it includes firms with no shareholder proposals. We find that negative public sentiment about financial, governance, environmental or social issues is associated with more shareholder proposals, and we establish causality through a creative instrumental variable approach. Further, shareholder actions have real consequences as a larger number of shareholder proposals appears to result in higher turnover for CEOs and directors.

Keywords: Public Opinion, Public Outrage, Proxy Advisors, Institutional Investors, Proxy Voting

JEL Classification: G32, G34, G38