Trust and Shareholder Voting

Trust and Shareholder Voting

Simon Lesmeister, Peter Limbach, Marc Goergen

Series number :

Serial Number: 
569/2018

Date posted :

March 12 2019

Last revised :

July 28 2018
SSRN Share

Keywords

  • culture • 
  • monitoring • 
  • Shareholder expropriation • 
  • Shareholder voting • 
  • trust

We test the hypothesis whether a specific aspect of culture – trust in others – affects shareholder voting by substituting for costly monitoring. We find consistent evidence that the percentage of votes cast at shareholder meetings is lower in high-trust countries (and U.S. counties) while the percentage of votes in support of management proposals is higher.

Shocks to trust and IV regressions confirm these results. We also find that shareholder voting is more valuable in low-trust countries, as reflected by a more positive effect on firm performance, which suggests that managers do not exploit lower levels of monitoring when trust is high.
 

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Authors

Real name:
Simon Lesmeister
Real name: 
Peter Limbach