Imagine being a shareholder in a company who couldn’t vote to change how that company is run.
It’s not something that would likely occur in the United States, but little to no finance research exists on the situation outside the U.S. So, Dr. Karl Lins, finance professor at the David Eccles School of Business, decided to explore the issue. He co-authored the paper “Shareholder Voting and Corporate Governance Around the World,” which has been accepted for publication in the Review of Financial Studies.
In it, he and his colleagues researched more than 8,000 firms in 43 non-U.S. countries and found largely consistent results.
“What we find overall is that laws and regulations allow for a meaningful vote to be cast because around the world — in general for the countries we studied — shareholder voting is both mandatory and binding for important corporate elections,” Lins said. “So, it looks like shareholders do have the ability to vote when there are important issues at hand.”
The paper details research on dissent voting, which the researchers found happens more often when there is a fear of expropriation by managers — that is, situations in which managers are likely to be using the shareholders’ money for purposes that serve the managers’ interests rather than the company’s best interest.