The Role of Advisory Services in Proxy Voting

Cindy R. Alexander, Mark A. Chen, Duane J. Seppi, Chester S. Spatt

NBER Working Paper No. 15143
Issued in July 2009
NBER Program(s):Asset Pricing Program, Corporate Finance Program

This paper studies the information content and consequences of third-party voting advice issued during proxy contests. We document significant abnormal stock returns around proxy vote recommendations and develop an estimation procedure for disentangling stock price effects due to changes in outcome probabilities from those due to changes in outcome-contingent valuations. We find that voting advice is a good predictor of contest outcomes and that vote recommendations appear to certify the extent to which dissidents can add value. Thus, proxy advice seems to play a dual informational role in financial markets.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w15143

Published: “Interim News and the Role of Proxy Voting Advice,” December 2010 (with C . Alexander, M . Chen and D . Seppi), Revi ew of Financial Studies , 23, 4419 - 4454.

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