Finance Seminar by Prof. Reena Aggarwal, McDonough School of Business, Georgetown University.

Title : The Role of Institutional Investors in Voting: Evidence from the Securities Lending Market.

 

Abstract : This paper investigates the voting preferences of institutional investors using the unique setting of the securities lending market. Institutional investors restrict lendable supply and/or call back loaned shares prior to the proxy record date to exercise their voting rights. We estimate the value of voting rights as the reservation price that investors place on retaining the right to vote. We find a greater value of voting rights for firms with weak corporate governance and poor performance, and proposals related to compensation, governance, and corporate control. Loan demand and the borrowing price also increase around the proxy voting record date. In the subsequent vote outcome we find a higher recall to be associated with less support for management and more support for shareholder proposals. Our results indicate that institutions value their vote and use the proxy process as an important channel for affecting corporate governance.