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The real effects of proxy advisors on the firm

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  • Paul Calluzzo
  • Evan Dudley

Abstract

This paper examines the influence of proxy advisors (PA) on firm voting outcomes, policies, and value. We measure PA influence with shareholders' historical propensity to follow PA recommendations. PA influence increases the impact of PA recommendations on proxy voting outcomes and firm policies. When shareholders have private incentives to engage in costly research in the absence of a proxy advisor, PA influence neither harms nor benefits shareholder value. However, at firms with dispersed shareholders PA influence can increase value. Our findings are consistent with theories of voting in which proxy advisors compete with private information acquisition efforts by large shareholders.

Suggested Citation

  • Paul Calluzzo & Evan Dudley, 2019. "The real effects of proxy advisors on the firm," Financial Management, Financial Management Association International, vol. 48(3), pages 917-943, September.
    • Handle: RePEc:bla:finmgt:v:48:y:2019:i:3:p:917-943
    DOI: 10.1111/fima.12251
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    Cited by:

    1. Dasgupta, Amil & Fos, Vyacheslav & Sautner, Zacharias, 2021. "Institutional investors and corporate governance," LSE Research Online Documents on Economics 112114, London School of Economics and Political Science, LSE Library.
    2. Artiga González, Tanja & Calluzzo, Paul & Granic, Georg D., 2023. "Ballot order effects in independent director elections," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    3. Paul M. Guest & Marco Nerino, 2019. "Do Corporate Governance Ratings Change Investor Expectations? Evidence from Announcements by Institutional Shareholder Services," Working Papers wp515, Centre for Business Research, University of Cambridge.

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