Trust and monitoring
We show that in countries with more societal trust shareholders cast fewer votes at shareholder meetings and are more supportive of management proposals. This result is confirmed by instrumental variable regressions. It also holds at the U.S.-county level and for voting by U.S. institutional investors. Lower monitoring via voting relates less negatively to future firm performance in high-trust countries, suggesting that managers do not exploit greater discretion when trust is high. We also find a negative relation between trust and bond spreads. Our evidence supports theory arguing that trust substitutes for monitoring and has implications for investors' optimal monitoring effort.
Year of publication: |
2022
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Authors: | Lesmeister, Simon ; Limbach, Peter ; Goergen, Marc |
Publisher: |
Cologne : University of Cologne, Centre for Financial Research (CFR) |
Subject: | Culture | Monitoring | Shareholder expropriation | Shareholder voting | Societal trust |
Saved in:
freely available
Series: | CFR Working Paper ; 18-02 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 1809641691 [GVK] hdl:10419/261099 [Handle] RePEc:zbw:cfrwps:1802 [RePEc] |
Classification: | G3 - Corporate Finance and Governance ; G19 - General Financial Markets. Other ; G32 - Financing Policy; Capital and Ownership Structure |
Source: |
Persistent link: https://www.econbiz.de/10013270674