Shareholder Votes on Sale

Andre Speit () and Paul Voss ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: This paper examines the effect of vote trading on shareholder activism and corporate governance. We show that vote trading enables hostile activism because voting rights trade at inefficiently low prices even when the activist’s motives are transparent. Our results explain empirical findings of low vote prices (Christofferson et al. 2007) and inefficient outcomes (Hu & Black 2006). Though an activist with superior information can facilitate information transmission through vote trading, traditional activist intervention techniques provide the same information transmission without the downsides inherent in vote trading. Our analysis of potential policy measures suggests that adopting simple majority rules and excluding bought votes offer the most promising intervention avenues.

Keywords: blockholder; decoupling techniques; empty voting; hostile activism; share-holder activism; vote trading (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Pages: 47
Date: 2020-08
New Economics Papers: this item is included in nep-cdm and nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2020_200

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