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Disloyal managers and proxy voting

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  • Wang, Xianjue

Abstract

We examine how proxy voting responds to increased agency cost with an intention-to-treat analysis. Using staggered adoption of Corporate Opportunities Waiver laws that erode the fiduciary duty when managers (including directors) appropriate business opportunities from focal firms, we find that shareholders are less likely to support contentious incumbent director elections, especially in more established firms and firms with more outside opportunities. Moreover, we show that proxy voting by long-term institutional investors contributes to this effect. Overall, our results suggest that shareholders respond to increased agency cost with increased monitoring.

Suggested Citation

  • Wang, Xianjue, 2022. "Disloyal managers and proxy voting," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321005729
    DOI: 10.1016/j.frl.2021.102636
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    Cited by:

    1. Lee, Eugenia Y. & Ha, Wonsuk, 2023. "Electronic voting in shareholder meetings and the market value of cash holdings," International Review of Financial Analysis, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Corporate opportunities waiver; Proxy voting; Agency cost; Long-term institutional investor; Mutual fund;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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