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Retail shareholders and the efficacy of proxy voting: evidence from auditor ratification

Review of accounting studies, 2024-03, Vol.29 (1), p.75-108 [Peer Reviewed Journal]

The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022. Springer Nature or its licensor holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. ;ISSN: 1380-6653 ;EISSN: 1573-7136 ;DOI: 10.1007/s11142-022-09719-8

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  • Title:
    Retail shareholders and the efficacy of proxy voting: evidence from auditor ratification
  • Author: Cassell, Cory A. ; Kleppe, Tyler J. ; Shipman, Jonathan E.
  • Subjects: Accounting/Auditing ; Business and Management ; Corporate Finance ; Public Finance
  • Is Part Of: Review of accounting studies, 2024-03, Vol.29 (1), p.75-108
  • Description: We investigate the influence and implications of retail shareholder participation in the proxy voting process. Using the shareholder vote on auditor ratification—a setting which facilitates the identification of an informed vote—we find that, on average, shareholder votes against auditor ratification are not associated with audit failures but are strongly associated with investment performance. We next consider how these relations vary with the composition of a company’s voting base and find consistent evidence that the auditor ratification vote becomes less informed (i.e., associated with factors that do not reflect auditor performance) as retail ownership increases. In subsequent tests, we find that the probability of auditor dismissal is increasing in the proportion of votes against auditor ratification, and that this relation does not vary significantly with the proportion of shares held by retail investors. Collectively, our results suggest that some auditors are dismissed for factors not directly related to auditor performance.
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 1380-6653
    EISSN: 1573-7136
    DOI: 10.1007/s11142-022-09719-8
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