Who Do You Vote for? Same-Race Preferences in Shareholder Voting

This paper examines racial preferences of shareholders in the context of corporate director elections. Focusing on director nominees receiving negative recommendations from the dominant proxy advisor ISS, we document a higher propensity of mutual fund managers to vote for such nominees who match their racial/ ethnic identity. We rule out various potential channels –statistical discrimination, shareholder value maximization, conflicts of interest, and social networks– using high-dimensional fixed effect models along with various heterogeneity tests. The evidence points to the documented same-race preference being consistent with taste-based biases, which lead to negative long-term consequences for minority candidates