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Shareholder Voting

Paper Session

Friday, Jan. 3, 2020 10:15 AM - 12:15 PM (PDT)

Manchester Grand Hyatt, Harbor A
Hosted By: American Finance Association
  • Chair: Doron Levit, University of Pennsylvania

The Costs and Benefits of Shareholder Democracy

Nickolay Gantchev
Southern Methodist University
Mariassunta Giannetti
Stockholm School of Economics


We study under what conditions the voting process weeds out harmful shareholder proposals. We show that there is cross-sectional variation in the quality of shareholder proposals. Some of the proposals submitted by the most active individual sponsors destroy shareholder value if supported by a majority of the votes cast and subsequently implemented. Bad proposals are less likely to obtain shareholder voting support in firms in which a larger fraction of shareholders collects information. These firms benefit from shareholder proposals, suggesting that the voting process should be reformed, but that shareholders’ ability to submit proposals should not necessarily be limited.

Managerial Response Under Shareholder Empowerment: Evidence from Majority Voting Legislation Changes

Vicente Cunat
London School of Economics
Yiqing Lu
New York University
Hong Wu
Hong Kong Polytechnic University


This paper studies how managers react to shareholder empowerment vis-à-vis governance provisions. We show that a staggered legislative change that increases noncompliance costs in the implementation of shareholder-initiated majority voting proposals is followed by an increase in its implementation via management initiatives. Management adopts provisions that crowd out shareholder-initiated proposals, pre-empt shareholder-initiated changes and give management control over future voting standard amendments. The remaining firms experience a more negative market return reaction in response to close-call votes on shareholder-initiated proposals. The results jointly indicate that managers seek to preserve shareholder-value by moderating the implementation of majority voting standards.

Phantom of the Opera: ETF Shorting and Shareholder Voting

Richard Evans
University of Virginia and Carlo Alberto College
Oğuzhan Karakaş
Cambridge University
Rabih Moussawi
Villanova University
Michael Young
University of Virginia


The short-selling of exchange-traded funds (ETFs) creates “phantom” ETF shares, trading at ETF market prices, with cash flows rights but no associated voting rights. Unlike regular ETF shares backed by the underlying securities of the ETF and voted as directed by the sponsor, phantom ETF shares are backed by collateral that is not voted. Introducing a novel measure of phantom shares both of the ETF and corresponding underlying securities, we find that increases in phantom shares are associated with decreases in number of proxy votes cast (for and against), and increases in broker non-votes, the vote premium, and value-reducing acquisitions.
John Matsusaka
University of Southern California
Michelle Lowry
Drexel University
Adam Reed
University of North Carolina-Chapel Hill
JEL Classifications
  • G3 - Corporate Finance and Governance