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The Distribution of Voting Rights to Shareholders

Published online by Cambridge University Press:  25 July 2022

Vyacheslav Fos Open the ORCID record for Vyacheslav Fos [Opens in a new window]  and
Clifford G. Holderness
Vyacheslav Fos*
Affiliation:
Boston College Carroll School of Management
Clifford G. Holderness
Affiliation:
Boston College Carroll School of Management clifford.holderness@bc.edu
*
fos@bc.edu (corresponding author)
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Abstract

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This is the first comprehensive study of the distribution of voting rights to shareholders. Only individuals owning stock on a record date may vote. Firms, however, reveal record dates after the fact 91% of the time. With controversial votes, firms are more likely to do the opposite, and this tendency is associated with a lower passage rate for shareholder-initiated proposals. The New York Stock Exchange sells nonpublic record-date information to select investors. When stocks go ex vote, prices decline and trading volume surges, suggesting that activist investors are buying marginal votes. These trends are most pronounced with controversial votes.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 5 , August 2023 , pp. 1878 - 1910
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank Christopher Carpenter and Thomas Schneider for their research assistance. This article has benefited from the comments of an anonymous referee as well as from Reena Aggarwal, James Dow, Ran Duchin, Alex Edmans, Jarrad Harford, Wei Jiang, Marcel Kahan, Michelle Lowry, Nadya Malenko, David Musto, Jeffrey Pontiff, Edward Rock, Philip Strahan, and seminar participants at the annual meeting of the American Finance Association, Boston College, the Chinese University of Hong Kong, Fudan University, the London Business School, the NBER Summer Institute, New York University, the PBC School of Finance at Tsinghua University, the School of Economics and Management at Tsinghua University, the Securities and Exchange Commission, and the John L. Weinberg Center for Corporate Governance at the University of Delaware. This project has also benefited from the visiting scholar program of the Research Institute of Capital Formation at the Development Bank of Japan. Finally, we thank the John Weinberg Center for selecting this article for the John L. Weinberg/IRRCi Investor Research Award.

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