Creating Controversy in Proxy Voting Advice

Andrey Malenko, Nadya Malenko and Chester S. Spatt

No 29036, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the design of recommendations (available to all shareholders) and research reports (available only to subscribers) by a proxy advisor, who maximizes profits from selling information to shareholders. We show that the advisor benefits from biasing its recommendations against the a priori more likely alternative, thereby “creating controversy” for the vote. In contrast, it serves the advisor’s interest to produce precise and unbiased research reports. Our results help reinterpret empirical patterns of shareholders’ voting behavior, suggesting that proxy advisors’ recommendations may not be a suitable benchmark for evaluating shareholders’ votes. Our model also rationalizes the one-size-fits-all approach in recommendations.

JEL-codes: D72 D82 D83 G34 K22 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-isf, nep-mic and nep-pol
Note: CF
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Citations: View citations in EconPapers (6)

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Working Paper: Creating controversy in proxy voting advice (2022)
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