Abstract
This paper responds to the discussion initiated by the European Securities and Markets Authority (ESMA) about the role of proxy advisors at European annual general meetings (AGMs) by providing novel descriptive evidence on the influence and method consistency of these advisors for a major European market. We analyze a sample of 1,664 AGM agenda items for 185 unique firms and the corresponding proxy voting recommendations issued by Institutional Shareholder Services (ISS) for the German proxy season 2010. We find that a negative ISS voting recommendation is on average associated with an 8.5 percent decrease in shareholder support. This effect is even more pronounced for firms with high free float, low voting turnout, and high ISS client base. Additional analyses further reveal that ISS’s recommendations significantly correlate with ISS’s commercially available corporate governance ratings (GRId). This finding highlights a potential method consistency with respect to ISS’s employed governance standards. Overall, this paper extends the growing literature on proxy voting advisory and contributes to the current European debate on the regulation of proxy advisors.
Published Version
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