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Proxy Advisory Firms and Corporate Shareholder Engagement

Author

Listed:
  • Aiyesha Dey
  • Austin Starkweather
  • Joshua T White

Abstract

We study how Institutional Shareholder Services (ISS) affect firms’ engagement with shareholders. Our analyses exploit a quasi-natural experiment using say-on-pay voting outcomes near a threshold that triggers ISS to review engagement activities. Firms receiving ISS treatment exhibit swift and substantive increases in extensive and intensive margins of engagement, especially when their boards have higher agency conflicts and directors are more likely to lose voting support from ISS. Increases in engagement persist over time, and shareholders appear to value the increased engagement. Collectively, we shed light on an unexplored channel through which ISS positively influences firms’ governance and information environments.

Suggested Citation

  • Aiyesha Dey & Austin Starkweather & Joshua T White, 2024. "Proxy Advisory Firms and Corporate Shareholder Engagement," The Review of Financial Studies, Society for Financial Studies, vol. 37(12), pages 3877-3931.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:12:p:3877-3931.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhae045
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    More about this item

    Keywords

    D72; D82; G34; G38; M12;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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