When do proxy advisors improve corporate decisions?

Berno Buechel, Lydia Mechtenberg and Alexander Wagner
Authors registered in the RePEc Author Service: Berno Büchel

No 17413, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the impact of proxy advisors (PAs) on shareholder decision-making. We posit two assumptions: (i) the board of directors has a better signal regarding the value-maximizing decision on a given issue than any single shareholder can have based on own research; (ii) shareholders can condition their investment in information acquisition on the PA's recommendation. If only assumption (i) holds, shareholders lack research incentives; PAs are not the root cause of suboptimal shareholder incentives. If assumption (ii) additionally holds, shareholders use PA recommendations to identify controversial issues for further investigation. Consequently, a PA improves corporate decision quality.

Keywords: Proxy advisors; Strategic voting (search for similar items in EconPapers)
JEL-codes: D72 D83 G23 (search for similar items in EconPapers)
Date: 2022-06
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Working Paper: When Do Proxy Advisors Improve Corporate Decisions? (2023)
Working Paper: When do proxy advisors improve corporate decisions? (2022)
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