The Long-Term and the Short-Term Versus the Engaged and the Exiting Shareholder

Abstract

The paper focuses on an empirical analysis of shareholder voting behavior. As Randall knows, little is known which classes are long term stockholders, rent seekers or engaged shareholders. Neither is studied how long-term shareholders vote or when these investors prefer exiting the company to voicing their preferences by voting their shares. Using individual shareholder voting data between 2018 and 2024 of a large listed Italian company welcoming yearly over 4,000 shareholders, this study provides the first detailed empirical analysis of shareholder voting and exiting decisions. Retail shareholders engage much longer than other shareholder classes. However, their influence is small to insignificant due to their small voting blocks. Different shareholder classes, especially retail shareholders take disparate voting decisions and the retail shareholder support with management is, contrary to general belief, lower than institutional investors’ support. Larger shareholders support management significantly more than smaller shareholders and only due to the larger shareholders’ backing, management can move forward as a large majority of the participating shareholders votes against many management’s proposals. Logistic regression found that the odds of exiting as an engaged shareholder increase dramatically by more than 300% for institutional investors compared to retail shareholders and conversely decrease fiercely if the shareholder is a long-term engaged shareholder. Support with management and corporate performance do decrease, resp. increase the odds of exiting as engaged shareholder but the odds are only slightly lower, resp. higher. The findings provide valuable insights for companies in steering the shareholder base.