VGSF - WU Vienna - LC

Nadya Malenko, University of Michigan, Ross School of Business

online via Zoom 17:30 - 18:15

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Nadya Malenko from the Uni­versity of Michigan, Ross School of Busi­ness to present her re­search pa­per.
Per­sonal Webpage

Pa­per

Cre­at­ing Con­tro­versy in Proxy Vot­ing Ad­vice

The qual­ity of proxy ad­visors´ vot­ing re­com­mend­a­tions is im­port­ant for poli­cy-­makers and in­dustry par­ti­cipants. We ana­lyze the design of re­com­mend­a­tions (avail­able to all mar­ket par­ti­cipants) and re­search re­ports (avail­able only to sub­scribers) by a proxy ad­visor, whose ob­ject­ive is to max­im­ize its profits from selling in­form­a­tion to share­hold­ers. We show that even if all share­hold­ers´ in­terests are aligned and aim at max­im­iz­ing firm value, the proxy ad­visor be­ne­fits from bi­as­ing its re­com­mend­a­tions against the a pri­ori more likely al­tern­at­ive. Such re­com­mend­a­tions “cre­ate con­tro­versy” about the vote, in­creas­ing the prob­ab­il­ity that the out­come is close and rais­ing each share­holder´s will­ing­ness to pay for ad­vice. In con­trast, it serves the in­terest of the proxy ad­visor to make private re­search re­ports un­biased and pre­cise. Our res­ults help re­in­ter­pret em­pir­ical pat­terns of share­hold­ers´ vot­ing be­ha­vior.



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