The Review of Corporate Finance Studies Vol. 10 No. 1 2021
Information Bias in the Proxy Advisory Market
Abstract
We study an information sale problem in which a monopolist proxy advisor sells recommendations to a firm’s shareholders for corporate voting. We find that even an unconflicted proxy advisor skews its recommendations based on its clients’ beliefs or preferences. A novel bias-quantity relationship affects firm value. Under some parameters, shareholders’ biased beliefs or preferences can lead shareholders to make more information purchases, which enhances their collective decision-making. Thus, firm value may increase despite the negative effects of biased proxy voting recommendations. JEL D82, G34, L15 Received: April 16, 2019; editorial decision March 25, 2020 by Editor Uday Rajan.
- DOI
- 10.1093/rcfs/cfaa005
- Volume
- 10
- Issue
- 1
- Pages
- 82-135
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref