Market reactions to proxy advisory companies’ recommendations in Japan

Kazuhide Masumoto and Fumiko Takeda

Finance Research Letters, 2022, vol. 50, issue C

Abstract: This study investigates how proxy advisory companies’ recommendations affect the stock prices of target companies in Japan, whose governance system has been under transition from relationship-based to more market-based. Based on 125 voting recommendations reported in newspapers between 2003 and 2022, we find that stock prices respond to recommendations inconsistent with the board's policy more largely than to those consistent. The market reactions become larger when firms are smaller and/or have a higher shareholding ratio of foreign investors, when recommendations are against takeover defense measures, and when the firms’ name attracts investor attention.

Keywords: Corporate governance; Corporate voting; Proxy advisory firms; Market value (search for similar items in EconPapers)
JEL-codes: G20 G24 G30 G34 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322005104

DOI: 10.1016/j.frl.2022.103331

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