Dear all,
Please join us for our next meeting of the Money, Markets, and Governance workshop TOMORROW, Tuesday, 1/24, in Social Science Research Building classroom 401, at 5pm – 6:30pm.
Rachel Geoffrey
PhD Student, Booth School, University of Chicago
The Monitoring and Corporate Governance Effect of Proxy Statements Dissemination on Heterogeneous Investors
Discussant: Anya Nakhmurina
PhD Student, Booth School, The University of Chicago
Abstract: This paper looks at the effect of the distribution and dissemination of proxy statements on monitoring and corporate governance. An important monitoring activity is participation in shareholder meeting voting. Investors have heterogeneous information processing and search costs for different methods of information dissemination. If these information costs associated with proxy information are high enough, then investors might disengage with the shareholder process. Retail investors are more likely to be disenfranchised by high information costs as they are typically less sophisticated that institution investors and because free rider issues place them closer to the margin between participating and not participating. The Securities Exchange Commission (SEC) required companies to choose between two proxy statement distribution systems, the “full access” system and the “notice and access system,” with a staggered implementation based on size. Large accelerated filers had an effective regulation date of January 1, 2008, and companies with public floats less than $700 million had an effective regulation date of January 1, 2009. The “notice and access system” reduces costs for disseminators whether they are the firm or activist investors; however, it potentially increases information costs for retail investors. I test how the SEC’s e-proxy regulation effects participation by retail investors. I also look at how net corporate governance changes due to the SEC’s e-proxy regulation.
Questions about the workshop or accessibility concerns can be addressed to yanivr {at} uchicago {dot} edu