this in-process draft may change. do not quote or circulate without the authors ’ permission. the role of advisory services in proxy voting by 1（这个进程内的草案可能会发生变化。）.pdfVIP

This in-process draft may change. Do not quote or circulate without the authors’ permission. The Role of Advisory Services in Proxy Voting by1 Cindy R. Alexander,* Mark A. Chen, Duane J. Seppi, and Chester S. Spatt October 2008 ABSTRACT We study the information content and consequences of third-party voting advice issued during proxy contests. Focusing on recommendations by a leading proxy advisor, we find significant abnormal stock returns around the dates recommendations become public. The economic interpretation is that voting advice conveys new information to the market. To investigate the precise nature of this information, we develop a two-stage procedure for decomposing price changes in response to interim news about future events into two components: The price impact of revisions in outcome-contingent expected valuations and the price impact of updated outcome probabilities. Applying this decomposition to interim voting recommendations and the subsequent contest outcomes, we find a robust statistical association between recommendations and contest outcome probabilities after controlling for contest characteristics, voting rules, and ownership levels of dissidents and incumbents. We also find evidence that advisory recommendations play a certification role by conveying information to investors about outcome-contingent stock valuations. The implication of our findings is that proxy advice plays a dual informational role, serving