Voting Outcomes Research Articles

Proxy Advisor Recommendations on Auditor Ratification: Who is Listening?

The auditor ratification vote provides shareholders with an opportunity to voice their opinions about the company’s choice of auditor, but historically, less than two percent of shareholders express dissent in their vote. Motivated by regulatory attention on the importance of shareholder involvement and the institutional power of proxy advisors on voting outcomes, I examine how proxy advisor recommendations affect shareholder voting for auditor ratification. Specifically, I examine whether low percentages of shareholder dissent in auditor ratification may be due to low levels of dissent expressed by proxy advisors. I find that proxy advisors have a significant influence over shareholder voting outcomes when they do recommend against auditor ratification, but the Against recommendation is rare. Proxy advisors are more likely to recommend against auditor ratification when based on signals in the DEF 14A proxy filing (e.g., the proportion of nonaudit fees), but rarely recommend against auditor ratification when using signals from other filings (e.g., restatements in 8-K filings). This may be due to bias given to readily available information or to underperformance in a credence goods scenario. I discuss the implications of these findings, which should be of interest to regulators, investors, public companies, and audit firms.

Company Stock in Defined Contribution Plans: Evidence from Proxy Voting

I examine whether firms’ decisions to offer company stock in defined contribution (DC) plans are explained by managers’ corporate control motives. Using a large sample of proxy voting outcomes, I find that employee ownership in DC plans is significantly and positively associated with the level of voting support for management‐sponsored proposals. This suggests that managers encourage employee DC holdings in company stock in order to receive higher voting support in favor of management. The effects of employee ownership on voting outcomes are significantly greater in specific subsamples where employee vote is more important to management.

Voting Behaviour on Free Votes: Simply a Matter of Preferences?

Previous research examining the outcomes of free votes concludes that voting behaviour is determined in large part by MPs’ personal preferences. However, most studies do not measure preferences directly and ignore other possible determinants of voting behaviour. This article illustrates the need to address these shortcomings before one concludes that preferences explain the outcomes of free votes. I illustrate this by examining a series of divisions on the issue of House of Lords reform. Using direct measures of preferences and controlling for alternative explanations, the analysis suggests MPs’ preferences had little effect on voting behaviour on this issue.

A Gadfly's Perspective on 'Gadflies at the Gate'

In the 2016 proxy season I became a corporate gadfly. This article makes explicit and expands on certain benefits touched on in Larcker & Tayan (2016); and urges the U.S. Securities and Exchange Commission to proceed with caution in judging the merit of shareholder proposals from individual proponents based on the outcome of the shareholder vote.

'Plain English' and Say-on-Pay: Regulatory Requirements vs Potential Behavioural Consequences

Since 2011, listed US companies are required to hold an advisory shareholder vote on the remuneration of named executive officers on information provided in the Compensation Discussion and Analysis report (CD&A). While the SEC requires that the CD&A be written in ‘Plain English’, commentators relay general dissatisfaction among the investment community regarding the readability of the average CD&A (Larcker et al., 2015). Prima facie, this calls for firms to invest in improving disclosure in the CD&A. The probable consequences from this investment however, in terms of affecting the outcome of the say-on-pay vote, are far from clear. Ample evidence exists in the Psychology, Finance, and Accounting literatures which suggests that readability can affect decision making within a financial setting. Lawrence (2013) finds that individual (small) investors are attracted towards investments in firms with clearer and more concise financial disclosures and argues that readability brings informational advantages for individual investors. The readability of financial disclosures may also affect the way that investors make decisions. Research from the Behavioural paradigm document a number of observed heuristics which may guide individuals’ decision making. Rennekamp (2012) argues that readability evokes the processing fluency heuristic, whereby information is perceived to be more credible if it is provided in a more readable manner. There is a danger that if shareholders are too quick to endorse pay decisions on the basis of inflated credibility, then a culture of excessive pay may prevail relatively unchallenged. We demonstrate that CD&A readability, inversely measured using the Gunning-Fog Index, has the effect of weakening the link between an established proxy of CEO excess pay and the probability of receiving a low say-on-pay voting result (firms with more readable CD&A are less likely to receive a no vote, despite similar levels of estimated CEO excess pay). This suggests that increased readability does on average lead to shareholders placing a greater decision weight on arguments presented in the CD&A framed in favour of proposed pay. While Rennekamp (2012) demonstrates that readability of press releases affects valuations using an experimental approach we examine the impact of processing fluency in a real setting where inflated credibility of management may significantly affect the voting outcome.

CEO Equity-Based Incentives and Shareholder Say-on-Pay in the U.S.

This paper examines the connection between shareholder voting outcome (percent in favor or opposed) and executive equity-based incentives (pay-performance sensitivity and pay-risk sensitivity) as part of the "Say-on-Pay" provision of the 2010 Dodd-Frank Act. Our setting allows us to directly test whether shareholders perceive equity-based incentives as a source of or solution to agency problems. Consistent with our hypotheses, we provide evidence that shareholders tend to approve of compensation packages that are more sensitive to changes in stock price (pay-performance sensitivity) and changes in stock volatility (pay-risk sensitivity). Our findings are generally consistent with theoretical predictions that outside owners approve of equity incentives as a means of aligning managers interests with those of shareholders and as a way to mitigate potential agency costs.

Wikipedia traffic data and electoral prediction: towards theoretically informed models

This aim of this article is to explore the potential use of Wikipedia page view data for predicting electoral results. Responding to previous critiques of work using socially generated data to predict elections, which have argued that these predictions take place without any understanding of the mechanism which enables them, we first develop a theoretical model which highlights why people might seek information online at election time, and how this activity might relate to overall electoral outcomes, focussing especially on how different types of parties such as new and established parties might generate different information seeking patterns. We test this model on a novel dataset drawn from a variety of countries in the 2009 and 2014 European Parliament elections. We show that while Wikipedia offers little insight into absolute vote outcomes, it offers a good information about changes in both overall turnout at elections and in vote share for particular parties. These results are used to enhance existing theories about the drivers of aggregate patterns in online information seeking.

The Legitimacy of Discriminatory Disenfranchisement? The Impact of the Rules on the Right to Vote in the Bremain/Brexit Referendum

Abstract The Divisional Court of the Queen’s Bench Division of the England and Wales High Court handed down its decision on 20 April 2016 in the judicial review case of Shindler. This ruling confirmed that British citizens living in other EU Member States for more than 15 years remain barred from voting in the June 2016 referendum. The case sparks further consideration of the voting rules in general and may therefore be of interest to others in considering questions of legitimacy in respect of the eventual outcome of the popular vote on 23 June. Unlike other states, the UK has no established rules on referendums and each such popular vote (and the franchise for it) is therefore treated on an ad hoc basis. Fears have been expressed that the government could manipulate the outcome of a referendum, particularly in determining a different franchise for each popular vote.

Bounding Causal Effects in Ecological Inference Problems

This paper is concerned with making causal inferences with ecological data. Aggregate outcome information is combined with individual demographic information from separate data sources to make causal inferences about individual behavior. In addressing such problems, even under the selection on observables assumption often made in the treatment effects literature, it is not possible to identify causal effects of interest. However, recent results from the partial identification literature provide the tightest upper and lower bounds on these causal effects. We apply these bounds to data from Chilean mayoral elections that straddle a 2012 change in Chilean electoral law from compulsory to voluntary voting. Aggregate voting outcomes are combined with individual demographic information from separate data sources to determine the causal effect of the change in the law on voter turnout. The bounds analysis reveals that voluntary voting decreased expected voter turnout, and that other causal effects are overstated if the bounds analysis is ignored.

Bounding Causal Effects in Ecological Inference Problems

This note illustrates a new method for making causal inferences with ecological data. We show how to combine aggregate outcomes with individual demographics from separate data sources to make causal inferences about individual behavior. In addressing such problems, even under the selection on observables assumption often made in the treatment effects literature, it is not possible to identify causal effects of interest. However, recent results from the partial identification literature provide sharp bounds on these causal effects. We apply these bounds to data from Chilean mayoral elections that straddle a 2012 change in Chilean electoral law from compulsory to voluntary voting. Aggregate voting outcomes are combined with individual demographic information from separate data sources to determine the causal effect of the change in the law on voter turnout. The bounds analysis reveals that voluntary voting decreased expected voter turnout, and that other causal effects are overstated if the bounds analysis is ignored.

Financial Market Effects of Synthetic Collateralized Debt Obligations

This paper examines the causal effect of index creation on security prices in related markets. Using a novel identification strategy, I document persistent treatment effects attributable to index inclusion. Variation in the difference between bond and credit default swap (CDS) spreads, known as the basis, is caused by variation in measures of index inclusion. Using proprietary data on the voting outcomes of the Markit CDX index formation process, I identify a persistent effect that contrasts with the predictions of existing theoretical models of the basis. Also, I document evidence of equity market contagion for firms included in a high number of credit indices.

It's My Stock and I'll Vote If I Want to: Conflicted Voting by Shareholders in (Hostile) M&A Deals

This paper fills a vacuum in current takeover literature by organically analyzing instances in which shareholders’ conflicts might lead to inefficient acquisition outcomes. While outside of the takeover field Delaware courts have been wary of the perils for shareholder wealth maximization of misalignments in shareholders incentives, and while almost all jurisdictions that require a shareholder referendum as a precondition to conduct a hostile transaction have implemented disinterested shares regimes, Delaware takeover law has been silent. This paper presents three possible approaches to address conflicted voting in acquisitions: a rule-based approach, a standard-based approach, and an unengaged approach. This paper argues that none of these approaches can be expected to work better than the others under all circumstances — they each carry positives and negatives. A system of balanced bright-line rules (that is, applicable to both bidder and target incumbents) would contain conflicted voting in a series of circumstances, but its potential over-deterrence can put at risk a subset of deals in which the universe of disinterested shareholders might not get it right. Standards have the advantage that, if well adjudicated, only the prohibited, conflicted conduct will be detected and sanctioned, with no problems stemming from over- or under-deterrence. But the worrying aspect of a standard approach is judicial discretion and potential error: the policy would call for the judge to establish the inherent long-term value of the target as an independent entity. While the advantage of the unengaged approach is preserving the status quo, its clear problem is not offering protection when a conflicted vote distorts the voting and acquisition outcomes. This paper suggests a combination of a rule-based approach and a standard-based one: the bidder and the incumbents would vote, but their shares would be presumed conflicted and thus not counted for determining the outcome of the vote/acquisition (rule-based element); however, each group could rebut the presumption by proving that its votes are not conflicted because they are directed to an outcome that maximizes shareholder value (standard-based element). This would constitute a less harsh version of a pure disinterested shares regime, because a group initially labeled as interested could actually demonstrate the opposite: entrenchment-seeking directors and management will have to convince a judge they are casting their vote because rejecting the bid is the best course of action, while bidders will have to prove their offer is not a low baller.

Precise Control Over Legislative Vote Outcomes: A Forensic Approach to Political Economics

We propose a forensic approach to investigate the politico-economic forces that influence narrow vote outcomes in legislative assemblies. Applying nonparametric estimation techniques to a data set covering all roll call votes between 1990 and 2014, we can identify the existence of precise control over legislative vote outcomes in the U.S. House of Representatives. Several pieces of evidence indicate that this control seems to be, at least partly, driven by campaign finance donations. Moreover, control seems to be most prevalent in times of higher electoral competition, i.e. during election years. Our contribution sheds new light on the role of money in politics and, more generally, opens a novel perspective to empirical research on legislative voting.

No Pressure, No Diamonds: The Role of Shareholder Activism on CSR Transparency

This paper investigates whether pressures from shareholder activism on CSR transparency lead to a change in corporate CSR disclosure. Rather than focusing on whether specific shareholders proposals are implemented, our aim is to understand whether the submission of CSR transparency-related proposals lead firms to increase their level of CSR disclosure. Such change in CSR disclosure is ex-ante not obvious because shareholders proposals typically receive low support, they are often perceived as interference in daily business activities or, irrespective of the voting outcome, are not binding managers to act. Drawing on social movement theory, we conceptualize how shareholders put pressure on firms via use of their voice, challenge corporate activities and bring transformation in corporate practice. We analyze the content of 2,089 CSR-related shareholders proposals filed during the period 2006-2012 and separately identify proposals that specifically request improved CSR transparency from proposals demanding other CSR related initiatives. Using propensity score matching to reduce the bias of confounding variables and choosing our control group from the pool of firms that are targeted by CSR proposals and thus under similar, although not identical, pressure, we show that shareholder activism leads to greater CSR disclosure. Overall, our study contributes to the literature by examining an under explored accounting outcome of activism: CSR transparency.

Anticipation of Political Party Voting Using Artificial Intelligence

This paper presents a novel application in the emerging field of computational politics. Here, we anticipate American congressional voting outcome using support vector machines (SVM) and back propagation learning algorithm neural network models. Our proposed method successfully associates opinions of American congress members on defined national issues with their political party affiliation as republican or democrat, thus providing a artificially intelligent anticipation system of the congressional voting outcome based on previous knowledge of how the congress members perceive national issues. Knowledge is obtained from existing congressional records which are unclassified and available online for research purposes. The obtained experimental results suggest that our novel method and application can be further applied to similar voting polls in order to anticipate the party members voting inclination.

The effects of lawn signs on vote outcomes: Results from four randomized field experiments

Although lawn signs rank among the most widely used campaign tactics, little scholarly attention has been paid to the question of whether they actually generate votes. Working in collaboration with a congressional candidate, a mayoral candidate, an independent expenditure campaign directed against a gubernatorial candidate, and a candidate for county commissioner, we tested the effects of lawn signs by planting them in randomly selected voting precincts. Electoral results pooled over all four studies suggest that signs increased advertising candidates’ vote shares. Results also provide some evidence that the effects of lawn signs spill over into adjacent untreated voting precincts.

Expressive Shareholder Democracy: A Multilevel Study of Shareholder Dissent in 15 Western European Countries

AbstractThis study develops an expressive understanding of shareholder dissent. In this view, shareholder dissent is not only about the voting outcomes of proposals put to the vote, but also expresses an evaluation of the firm's corporate governance set‐up. We hypothesize that shareholder dissent expresses an agency theoretical evaluation of corporate governance, but that the degree to which the capitalist system of a country is a coordinated market economy (CME) leads shareholders to evaluate corporate governance more in team production terms. We test our theoretical model using multilevel techniques on a sample of 12,513 proposals voted on in 717 firms listed in 15 Western European countries and find support for our predictions. Our study not only contributes to a better understanding of the corporate governance role of shareholder dissent, but also shows that what shareholders express through dissent differs across national contexts.

Shareholder voting and merger returns

Using a sample of 384 shareholder meetings, I investigate whether shareholder votes on mergers and acquisitions in both target and acquirer firms are related to announcement day abnormal returns and whether the voting outcome has implications for the short- and long-run merger performance. I find that shareholder voting dissent is negatively related to both abnormal returns upon merger announcement and recommendations by the Institutional Shareholder Services. The former relationship is stronger for target firms and only borderline significant for acquirer firms. Overall, shareholders seem to take both advisor opinions and market beliefs into account when taking their voting decision. I also find that cumulative abnormal returns on the meeting date are strongly positively related to voting dissent. The observed relationship holds only for mergers with a long negotiation period, suggesting that in these mergers a higher fraction of residual uncertainty is resolved with a “pass” vote. Furthermore, I find that voting dissent is negatively related to long-run abnormal merger performance, suggesting a predictive power of merger votes.

Information and Wasted Votes: A Study of U.S. Primary Elections

We study whether information leads voters and donors to “waste” fewer votes and donations on candidates who do not finish in first or second place. Examining U.S. primary elections featuring more than two candidates, we compare voting and contribution behavior across offices with varying levels of information. We find that voters and donors are more likely to support the top two candidates, and less likely to waste votes or donations on lesser candidates, when information levels are higher. In addition, we find that donors consistently act more “strategically” — i.e., waste fewer donations on lesser candidates — than voters. To supplement these analyses, we isolate the causal effect of information by leveraging adjacent U.S. counties that differ in their access to politically relevant information from the media. We again find that information helps voters avoid wasting votes on candidates who are unlikely to win. The results are relevant for understanding the behavior of voters and contributors, for understanding the role of information in elections, and for the evaluation of policies likes runoff primaries designed to facilitate strategic voting outcomes.

Advocacy and political convergence under preference uncertainty

We study the formation of advocacy groups and how they can impact policy outcomes by revealing information about voters׳ preferences to uninformed political candidates. We conduct a laboratory experiment based on a two-candidate spatial electoral competition setting where the policy preferences of voters are (initially) unknown and change over time. In the control treatment candidates learn about the preferred policy of the median voter through the voting outcome of elections. In the advocacy treatments, voters can organize themselves into advocacy groups in order to reveal their policy preferences. We find that voters often overcome the collective action problem of forming an advocacy group. In fact, we observe the formation of both informative advocacy groups, which convey new information, and uninformative advocacy groups, which do not. Overall, advocacy groups significantly speed up the convergence to the preferred policy of the median voter. However, advocacy does not lead to higher earnings as the gains from faster convergence are offset by the costs of group formation.