HOW DOES SHAREHOLDER VOTING INFLUENCE INDIVIDUAL INVESTORS’ INVESTMENT DECISIONS?

Shareholder voting is an important way for investors to participate in corporate governance. In this study, I examine, as individual investors participate in shareholder voting, whether and how their investment decision is affected by the consistency between their own vote and management’s final decision on the voting issue (i.e., opinion consistency) and whether management’ final decision aligns with the majority or minority of investors (i.e., management position). Using ego-defensiveness theory and majority effect, I predict and find that when investors have stronger opinions on the voting issue, they make more positive investment decisions if management’s final decision on the voting issue is consistent (versus inconsistent) with their own vote, and this effect is stronger when management aligns with the minority of investors, compared to when management aligns with the majority of investors. In contrast, when investors have weaker opinions on the voting issue, they make more positive investment decisions when management aligns with the majority of investors (versus aligns with the minority of investors), regardless of whether management’s final decision is consistent with their own vote. My study improves our understanding on the role of investor voting in forming investors’ investment decisions, and has practical implications for regulators, company management, and individual investors