Discussion paper

DP17413 When do proxy advisors improve corporate decisions?

This paper studies the impact of proxy advisors (PAs) on shareholder decision-making. We posit two assumptions: (i) the board of directors has a better signal regarding the value-maximizing decision on a given issue than any single shareholder can have based on own research; (ii) shareholders can condition their investment in information acquisition on the PA's recommendation. If only assumption (i) holds, shareholders lack research incentives; PAs are not the root cause of suboptimal shareholder incentives. If assumption (ii) additionally holds, shareholders use PA recommendations to identify controversial issues for further investigation. Consequently, a PA improves corporate decision quality.


Buechel, B, L Mechtenberg and A Wagner (2022), ‘DP17413 When do proxy advisors improve corporate decisions?‘, CEPR Discussion Paper No. 17413. CEPR Press, Paris & London. https://cepr.org/publications/dp17413