Investor Ideology

Investor Ideology

Patrick Bolton, Tao Li, Enrichetta Ravina, Howard Rosenthal

Series number :

Serial Number: 
557/2018

Date posted :

April 04 2018

Last revised :

April 04 2018
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Keywords

  • institutional investors • 
  • proxy voting • 
  • Ideal Points • 
  • Spatial Model of Voting

This paper analyzes the voting patterns of institutional investors from their proxy voting records. It estimates a spatial model of voting, using the W-NOMINATE scaling for voting in legislatures. We find that institutional investors’ ideology (or ideal points) can be mapped onto a left-right dimension, just as legislators’ ideologies can be represented along a left-right spectrum.

The far-left investors are socially responsible investors and the far-right investors are “greedy” investors, those opposed to proposals that could financially cost shareholders. There are significant ideological differences across institutional investors and there is no shareholder unanimity. The proxy adviser Institutional Shareholder Services (ISS) plays a role similar to a political party. A second adviser, Glass Lewis, has fewer followers. We find that the ideology of ISS is center-left, to the left of most institutional investors and Glass Lewis. Furthermore, Vanguard and Blackrock are center-right, and the ideology reflected in management proposals and voting recommendations is far to the right. Investors on the left support a more social orientation of the firm on environmental and other issues. They also support fewer executive compensation proposals.
 

Authors

Real name: 
Tao Li
University of Warwick
Real name:
Enrichetta Ravina
Real name:
Howard Rosenthal