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When two experts are better than one: The example of shareholder voting

Author

Listed:
  • Buechel, Berno
  • Mechtenberg, Lydia
  • Wagner, Alexander F.

Abstract

Introducing a single expert's advice before a vote can diminish its informational efficiency. We show that when two independent experts are involved, the opposite occurs: informational efficiency increases. We model expert advice, individual information acquisition, and voting in common-interest scenarios, using proxy advice and shareholder voting as the primary example. Adding a second expert enhances decision quality under two plausible assumptions: the first expert holds superior information compared to individual voters, and the second expert's advice is timely. When the second expert challenges the first's proposal, voters are prompted to conduct their own inquiries, resulting in better-informed decisions and reducing the likelihood of correlated errors. These findings hold implications for collective decision-making across various organizational settings.

Suggested Citation

  • Buechel, Berno & Mechtenberg, Lydia & Wagner, Alexander F., 2022. "When two experts are better than one: The example of shareholder voting," CEPR Discussion Papers 17413, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17413
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    More about this item

    Keywords

    Collective decision-making; Information acquisition; Proxy advisors; Strategic voting;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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