Essays on Shareholder Voting
This dissertation consists of two essays on shareholder voting. In the first chapter, I develop a structural model of shareholder voting in the presence of blockholders. I show theoretically that there is an ambiguous relationship between a blockholder's bias — the extent to which it is influenced by factors beyond firm value, such as conflicts of interest with management — and its support rate — the probability that it votes according to management's recommendations. To recover the voting preferences of the "Big Three" passive investors, I structurally estimate the model using voting data on compensation proposals. While the Big Three are more likely to vote with management, my estimates do not uniformly indicate that they are biased. My results challenge the narrative that the growth in passive investing harms corporate governance.
The second chapter represents joint work with Alon Brav, Wei Jiang, and Tao Li. We study mutual fund voting in proxy contests using a rich dataset constructed from regulatory filings. We use our dataset to address the ongoing debate over the effect of passive investing on corporate governance. Consistent with existing studies, we show that relative to active funds, passive funds are more likely to side with management, but we provide several important qualifications. For example, passive funds research SEC materials more often than active funds, and they appear equally informed about firm fundamentals. Overall, we conclude that passive funds remain engaged shareholders.
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