When Shareholders Vote – and the Market Listens

On Friday 27 February Rusha Nandy will hold a trial lecture on a prescribed topic and defend her thesis for the PhD degree at NHH. Title of the thesis: «Essays on Shareholder Voting».

In her thesis, Rusha Nandy focuses on shareholder voting, a core mechanism through which shareholders engage in corporate governance. However, shareholders have a rational apathy to participate in voting as the costs of information acquisition may exceed expected benefits. Hence, she focuses on two principal roles of shareholder voting- aggregation of preferences and aggregation of information.

Her dissertation consists of three empirical papers and contributes to the information aggregation role.

In her first co-authored paper, Nandy studies stock market reactions to institutional investors’ pre-disclosure of voting positions by investigating price reactions to voting intentions publicly disclosed by NBIM, the asset manager of the world’s largest sovereign wealth fund, ahead of its portfolio firms’ shareholder meetings. By classifying voting intentions as “dissent” when they oppose management recommendations, they find positive abnormal returns around announcements of dissent for close-call proposals. Further, their results support the certification channel: NBIM is more likely to engage with firms where it dissents, suggesting that investors perceive dissent as a credible signal of increased monitoring.

When Norway’s Sovereign Wealth Fund Speaks Up, the Market Listens

A new study shows that share prices rise when NBIM announces its intention to vote against corporate management. `The market sees it as a sign that someone is watching, ´ says NHH researcher Tzu-Ting Chiu.

In the second co-authored project, they examine how the duration of the shareholder voting window shapes the attendance and voting behavior of non-controlling shareholders. They exploit the pre-meeting shareholder voting regulation implemented by China’s Shanghai Stock Exchange (SSE) in May 2022 as a quasi-natural experiment. The authors find that SSE-listed firms experience significantly higher turnout, and more votes cast against management by non-controlling shareholders after the regulation.

In her third solo-authored project, the candidate focuses on the quality of board evaluations using a self-constructed measure, and that fundamental firm characteristics are significant determinants of evaluation quality. However, the regulatory mandate itself is insufficient to ensure high quality evaluations. Further, there is a negative association between the quality of board evaluations and shareholder dissent, but shareholders do not place additional value on board evaluation quality under NYSE mandates. Overall, these findings contribute to our understanding of how firm and institution-level changes can make shareholder voting a meaningful tool for shareholder monitoring.