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Shareholder Votes on Sale

Author

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  • Andre Speit
  • Paul Voss

Abstract

This paper examines the effect of vote trading on shareholder activism and corporate governance. We show that vote trading enables hostile activism because voting rights trade at inefficiently low prices even when the activist’s motives are transparent. Our results explain empirical findings of low vote prices (Christofferson et al. 2007) and inefficient outcomes (Hu & Black 2006). Though an activist with superior information can facilitate information transmission through vote trading, traditional activist intervention techniques provide the same information transmission without the downsides inherent in vote trading. Our analysis of potential policy measures suggests that adopting simple majority rules and excluding bought votes offer the most promising intervention avenues.

Suggested Citation

  • Andre Speit & Paul Voss, 2020. "Shareholder Votes on Sale," CRC TR 224 Discussion Paper Series crctr224_2020_200, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_200
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp200
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    More about this item

    Keywords

    blockholder; decoupling techniques; empty voting; hostile activism; share-holder activism; vote trading;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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