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Thy Neighbor’s Vote: Peer Effects in Proxy Voting

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  • Jiekun Huang

    (Department of Finance, Gies College of Business, University of Illinois at Urbana–Champaign, Champaign, Illinois 61820)

Abstract

Institutional investors’ proxy voting decisions are influenced by their neighbors. I identify peer effects in proxy voting using close-call votes on shareholder-sponsored governance proposals at publicly traded financial institutions (focal institutions). I first show that the passage of a governance proposal at a focal institution makes the institution more likely to vote against management at its portfolio firms. Using a triple-difference approach, I find that the neighboring institutions of the focal institution that passes a governance proposal become more likely to vote against management in stocks that are heavily held by the focal institution. These results suggest that peer influence is an important determinant of proxy voting behavior.

Suggested Citation

  • Jiekun Huang, 2023. "Thy Neighbor’s Vote: Peer Effects in Proxy Voting," Management Science, INFORMS, vol. 69(7), pages 4169-4189, July.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:7:p:4169-4189
    DOI: 10.1287/mnsc.2022.4517
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