How Does Market Competition Affect Shareholder Voting? Evidence from Branching Deregulation in the U.S. Banking Market

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Original languageEnglish
Article number387
Journal / PublicationJournal of Risk and Financial Management
Volume15
Issue number9
Online published30 Aug 2022
Publication statusPublished - Sept 2022

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Abstract

Exploiting interstate branching deregulations during 1994–2005 as exogenous shocks to banking market competition, we examine the impact of increased market competition on shareholder voting in the U.S. banking industry. Voting is one of the primary mechanisms through which shareholders participate in corporate governance and “voice” their opinions to company management, yet little is known about how external market environments shape shareholder voting behavior. Using a difference-in-differences design, and a sample of 596 banks (17,783 bank-year proposals), we are the first to provide large-sample, systematic evidence that the intensification of market competition leads to an increase in rates of disapproval for management proposals. We further document that the relation between the two is more pronounced among states with higher degrees of deregulation and weaker levels of pre-deregulation competition. Overall, our findings are consistent with the notion that increased competition among U.S. banks induces more shareholders to vote against management proposals.

Research Area(s)

  • bank deregulation, competitive pressure, market competition, shareholder voting

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