Research

Managerial share pledging is controversial due to perceived stock price crash risks. Yet, U.S. boards often permit it, implying potential shareholder benefits or managerial rent-seeking. Using hand-collected S&P 1500 data (2007-2020), I find that share pledging offers significant benefits—greater incentive alignment, reduced executive pay, and lower voluntary executive turnover—with little evidence of increased crash risk. Crucially, these advantages accrue primarily to firms with low managerial control. The 2012 ISS anti-pledging policy disproportionately impacted these firms, leading them to curtail a beneficial practice, while having minimal effect on management-controlled firms where benefits are scarce. My findings challenge the criticism of share pledging, suggesting that for firms with widespread ownership it is a valuable tool for incentive alignment and cost reduction, and that one-size-fits-all regulatory pressure by entities like ISS may be counterproductive for shareholders.

We provide evidence of a fundamental shift in how managers influence voting outcomes around annual meetings. We begin by predicting that the rise of proxy advisory firms and the introduction of mandatory say-on-pay (SOP) voting have shifted managers’ incentives away from priming shareholders directly. Consistent with this prediction, we find that managers now strategically target proxy advisors who guide institutional investor votes, rather than targeting dispersed shareholders directly. Consequently, the pre-meeting abnormal returns documented by previous work disappear in the post-SOP period. Further, managers facing greater SOP-related scrutiny from proxy advisors are more likely to improve relative performance in the fourth quarter. These improvements increase the likelihood of favorable proxy advisor recommendations and, in turn, more favorable SOP voting outcomes. Managers achieve these improvements through strategically timed disclosures and share repurchases. We conclude that mandatory SOP induces managers to actively manage key performance metrics in anticipation of proxy advisor evaluations.

We investigate the link between CEOs' unrealized capital gains tax liabilities ("tax burdens") and share pledging; a practice in which executives use shares in their firm as collateral for personal loans. We argue that a prime benefit of share pledging is the ability to obtain personal liquidity without selling appreciated stock, thereby enabling CEOs to avoid triggering large tax liabilities. Employing a hand-collected sample of executives' share pledging, we provide the first systematic evidence that CEO taxes are a primary driver of the decision to pledge shares. After Institutional Shareholder Services (ISS) discouraged the practice in 2012, firms with high-tax burden CEOs were less likely to impose anti-pledging restrictions. Moreover, those firms that restricted share pledging increased liquid pay for affected CEOs. Overall, our findings indicate that taxes are a first-order driver of share pledging, and that firms and CEOs use share pledging to contract around CEOs' personal tax liabilities.

We study the role of public disclosure of voting positions and engagement meetings in tacitly coordinating influence on companies at annual meetings of US listed firms. Using a difference-indifference design, we find that a large universal investor's (Norges Bank Investment Management-"NBIM") early release of its voting positions opposing management has a significant incremental effect on the voting outcomes for director elections and shareholder proposals. In addition, we document that early release of voting positions is more influential when NBIM's position is less likely to be predictable. We further find that NBIM is more likely to engage with firms both before (which may provide private information to inform voting) and after (to follow up and continue to advocate for change) dissenting votes and that its voting position has more influence when it is preceded by direct engagement, suggesting that other investors view these voting positions as more credible signals.