Proxy advisors, private firms that help institutional investors decide how to vote their
shares, play an extremely powerful role in shaping corporate governance. However,
investors and policymakers are concerned about undesirable features of the industry,
especially potential conflicts of interest.
In this paper, I model how conflicts of interest may arise when a proxy advisor provides services to both investors and corporate issuers on the same governance issues. I then study how increased competition can alleviate these conflicts. Using a unique dataset on voting recommendations, I show that the entry of a new advisory firm reduces favorable recommendations for management proposals by the incumbent advisor, which is consistent with our theory as the incumbent is subject to conflicts of interest by serving both investors and corporations. These results shed light on the policy debate on whether and how to regulate the proxy advisory industry.
This paper looks at the phenomenon of “defensive regulatory competition” in European corporate law following Centros, Überseering and Inspire Art. In order to retain control over the corporate governing...Read more
We develop a model of competition for managerial talent in which firms asymmetrically learn about the ability of their managers. In equilibrium, firms poach talent from competitors, even in the absence of gains from trade. Our main result is that...Read more
This paper studies mutual fund voting in proxy contests using a comprehensive sample of voting records over the period 2008 - 2015, taking into account selective targeting by activists. We find that firm, fund, and event characteristics generate...Read more
Scholars and antitrust enforcers have raised concerns about anticompetitive effects that may arise when institutional investors hold substantial stakes in competing firms. Their concern rests on empirical evidence that such common concentrated...Read more