Informed Voting

Abstract

Information production by shareholders is of fundamental importance for the efficiency of proxy voting. We propose a stock-return based measure to capture informed voting. Our measure, the vote alpha, quantifies the extent to which a shareholder votes in the direction that the market perceives as value increasing. Using data on mutual funds proxy voting records, we find that the vote alpha is persistent. Our main result shows that the voting pattern of high vote alpha funds predicts abnormal stock returns at horizons up to 18 months following contentious votes. We further find that the presence of high vote alpha funds leads to improved operating performance and stock returns.