When Shareholders Disagree: Trading After Shareholder Meetings

When Shareholders Disagree: Trading After Shareholder Meetings

Sophia Zhengzi Li, Ernst Maug, Miriam Schwartz-Ziv

Series number :

Serial Number: 
594/2019

Date posted :

February 01 2019

Last revised :

July 08 2020
SSRN Share

Keywords

  • shareholder meetings • 
  • voting • 
  • disagreement • 
  • trading • 
  • Volume

This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Using data on daily trades, we find that mutual funds reduce their holdings if their votes are opposed to the voting outcome. Trading volume is high even when stock prices do not change, peaks on the meeting date, and remains high up to four weeks after shareholder meetings.

To interpret these findings, we explore models based on differences of opinion, which predict that shareholders’ beliefs diverge more after observing voting outcomes and offer sharp predictions on the relationship between volume and volatility. We find strong support for these predictions in the data. Hence, trading after-meetings creates a shareholder base with more homogeneous beliefs. We argue that these findings have important implications for corporate governance.

Authors

Professor
Real name:
Miriam Schwartz-Ziv
Michigan State University
Real name:
Sophia Zhengzi Li