Abstract

We study an information-sale problem in which a monopolist proxy advisor sells recommendations to a firm's shareholders for corporate voting. We find that even an unconflicted proxy advisor skews its recommendations based on its clients' beliefs or preferences. The firm value is determined by a novel bias-quantity trade-off. Under some parameters, shareholders' biased beliefs or preferences can lead to more information purchases, which enhances their collective decision-making. Thus the firm value may increase despite the negative effects of biased proxy-voting recommendations.

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