December 2024
Article
Review of Financial Studies

Proxy Advisory Firms and Corporate Shareholder Engagement

By: Aiyesha Dey, Austin Starkweather and Joshua White

Format:Print
| Pages:55

Abstract

We study how Institutional Shareholder Services (ISS) affect firms’ engagement with shareholders. Our analyses exploit a quasi-natural experiment using say-on-pay voting outcomes near a threshold that triggers ISS to review engagement activities. Firms receiving ISS treatment exhibit swift and substantive increases in extensive and intensive margins of engagement, especially when their boards have higher agency conflicts and directors are more likely to lose voting support from ISS. Increases in engagement persist over time, and shareholders appear to value the increased engagement. Collectively, we shed light on an unexplored channel through which ISS positively influences firms’ governance and information environments.

Keywords

Business and Shareholder Relations; Governing and Advisory Boards; Policy; Voting

Citation

Dey, Aiyesha, Austin Starkweather, and Joshua White. "Proxy Advisory Firms and Corporate Shareholder Engagement." Review of Financial Studies 37, no. 12 (December 2024): 3877–3931.