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Journal of Finance Vol. 62 No. 6 2007

Vote Trading and Information Aggregation

Susan E. K. Christoffersen; Christopher C. Géczy; David K. Musto; Adam V. Reed1

1 Christoffersen is with McGill University, Geczy and Musto are with the University of Pennsylvania, and Reed is with the University of North Carolina. The authors thank the editor, the associate editor, and an anonymous referee. We have greatly benefited from helpful advice and comments from Renée A

Abstract

The standard analysis of corporate governance assumes that shareholders vote in ratios that firms choose, such as one share‐one vote. However, if the cost of unbundling and trading votes is sufficiently low, then shareholders choose the ratios. We document an active market for votes within the U.S. equity loan market, where the average vote sells for zero. We hypothesize that asymmetric information motivates the vote trade and find support in the cross section. More trading occurs for higher‐spread and worse‐performing firms, especially when voting is close. Vote trading corresponds to support for shareholder proposals and opposition to management proposals.

DOI
10.1111/j.1540-6261.2007.01296.x
Volume
62
Issue
6
Pages
2897-2929
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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