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 study how CEOs' personal tax incentives shape both their share pledging decisions and firms' restrictions on the practice. Pledging shares entails using company stock as collateral for personal loans, enabling executives to obtain liquidity without making a taxable sale of appreciated shares. Using pledging data from 2006-2024, we find a robust positive relation between CEOs' unrealized capital gains tax liabilities, or tax burdens, and share pledging. This relation is weaker when interest rates are high, consistent with CEOs trading off tax benefits against borrowing costs. After Institutional Shareholder Services discouraged share pledging in 2012, firms with high-tax-burden CEOs were slower to adopt anti-pledging policies and, when they did adopt, chose less restrictive policies. Firms that adopted strong anti-pledging policies subsequently increased CEO cash pay and stock awards. Overall, our evidence suggests that share pledging helps executives manage personal tax lock-in, and that firms consider this benefit when restricting pledging.

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.