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The Role of Institutional Investors in Voting: Evidence from the Securities Lending Market
Author(s) -
AGGARWAL REENA,
SAFFI PEDRO A. C.,
STURGESS JASON
Publication year - 2015
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12284
Subject(s) - proxy voting , corporate governance , voting , institutional investor , shareholder , proxy (statistics) , business , incentive , recall , monetary economics , accounting , financial system , finance , economics , market economy , disapproval voting , politics , political science , linguistics , philosophy , machine learning , computer science , law
This paper investigates voting preferences of institutional investors using the unique setting of the securities lending market. Investors restrict lendable supply and/or recall loaned shares prior to the proxy record date to exercise voting rights. Recall is higher for investors with greater incentives to monitor, for firms with poor performance or weak governance, and for proposals where returns to governance are likely higher. At the subsequent vote, recall is 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 to affect corporate governance.