Proxy Advisors and Shareholder Dissent: A Cross-Country Comparative Study

Proxy advisors are information intermediaries that enable shareholders to exercise their voting rights. While proxy advisors’ influence is documented in market-based corporate governance systems, we know little about the corporate governance role of proxy advice in relationship-based governance systems. Drawing on agency theory and the comparative corporate governance literature, we theorize that shareholders are sensitive to the costs and benefits of monitoring by considering internal monitoring capabilities. We also theorize that relative to market-based corporate governance systems, proxy advice is both less influential and has lower predictive quality in relationship-based governance systems. We test our multilevel model using 13,497 voting results from 613 firms in 16 Western European countries and generally find support for our predictions.