RFS-Iliev, Kalodimos, Lowry - 2021 - Investors' Attention To Corporate Governance-Annotated

Investors’ Attention to Corporate
Governance
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Peter Iliev
Pennsylvania State University
Jonathan Kalodimos
Oregon State University
Michelle Lowry
Drexel University
Using unique data on investor views of EDGAR company filings, we document that
many investors engage in governance research. However, investors’ monitoring is
disproportionately focused on large firms and firms with meetings outside the busy spring
proxy season. Using an instrumental variables approach that isolates the drop in governance
attention during the busy proxy season, we show that governance research is related to
investors’ monitoring of firms, through voice and exit. Moreover, governance research
disciplines management, who, as a result, reduce investments and increase payouts. The
concentration of attention results in joint monitoring of a relatively small subset of firms.
(JEL G30, G34)
Received February 28, 2019; editorial decision November 7, 2020 by Editor Lauren Cohen.
Authors have furnished an Internet Appendix, which is available on the Oxford University
Press Web site next to the link to the final published paper online.
The separation of ownership and control within public firms results in agency
costs that lower firm value (Jensen and Meckling 1976). Shareholders can
limit these agency costs by monitoring management. Importantly the manager
We wish to thank Ian Appel, Philip Bond, Diane Del Guercio, Diane Denis, Alex Edmans, Todd Gormley, Tom
Griffin, Jarrad Harford, David Haushalter, Mathew Gustafson, Jonathan Karpoff, Jason Kotter, Nadya Malenko,
Gregor Matvos, and John Hackney and seminar and brown bag participants at the American Finance Association
Meeting, Financial Management Association, Frontiers In Finance Conference, FIRS Finance Conference,
Florida State University SunTrust Conference, Miami Behavioral Conference, The Weinberg Center Corporate
Governance Symposium at the University of Delaware, University of Manitoba-Quadrant Behavioral Finance
Conference, Arizona State University, Drexel University, Geneva Finance Research Institute, HEC Montreal-
McGill joint seminar, IESEG, Lafayette College, Pennsylvania State University, University of Arizona, University
of California at Berkeley, University of Missouri, University of Nebraska, University of Tennessee, University
of Utah, and University of Washington for their helpful comments and discussions. Peter Iliev acknowledges
financial support from the Smeal Research Grant Program, and Michelle Lowry acknowledges financial support
from the Gupta Governance Institute. Supplementary data can be found on The Review of Financial Studies web
site. Send correspondence to Michelle Lowry, michelle.lowry@drexel.edu.
The Review of Financial Studies 00 (2021) 1–48

© The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies.
All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.
doi:10.1093/rfs/hhab003 Advance Access publication January 30, 2021
[08:44 27/11/2021 RFS-OP-REVF210004.tex] Page: 1 1–48

The Review of Financial Studies / v 00 n 0 2021
also benefits from such oversight, as the expected benefits to the CEO and
management team from better future performance outweigh the loss in utility
due to lower perquisite consumption. However, in the absence of monitoring
the manager is unable to credibly commit to such best practices. Despite
the advantages of such oversight across multiple parties, frictions can cause
monitoring to be at a suboptimally low level. As highlighted by Berle and

Means (1932), any single shareholder incurs all the costs of monitoring but
enjoys only a small portion of the benefits.
Corporate governance can be broadly defined as the set of firm practices
that seek to minimize such frictions and thereby mitigate agency costs.
Commensurate with the value of such policies, regulatory bodies mandate that
companies satisfy various governance standards. Companies are also required
to provide a rich set of disclosures related to governance, for example, on boards
of directors, compensation plans, ownership structure, transactions with related
parties, shareholder elections, and, more broadly, the balance of power between
managers and shareholders. Market participants’ reliance on such information,
that is, their governance-related research, facilitates the two primary means
of monitoring: voice and exit.1 More informed investors should make better
decisions.
The objectives of the paper are threefold. First, we develop a novel direct
measure of governance research, based on investors’ views of proxy filings
in EDGAR. We use this to examine the determinants of governance research
across different investors and different firms. We examine firm-level factors,
investor characteristics, and coordination between investors. We also investigate
the extent to which the timing of firms’ annual meetings, in particular
whether the meeting occurs during the busy spring proxy season, represents
a shock to investors’ attention. Second, we examine whether more governance-
related research relates to investors’ two means of monitoring: voice and
exit. Third, we investigate whether greater attention influences subsequent
changes in the underlying companies, as would be the case if either shareholder
engagement or the threat of exit represents an effective mechanism to achieve
change.
Our novel empirical measure of governance research is based on investors’
viewings of specific regulatory filings, firm proxy statements. This approach
provides several advantages over measures of investor attention used in
prior literature. First, it isolates attention to one specific issue, governance,
and separates it from attention to financial and operational issues. This
contrasts with more general measures of attention, such as extreme returns,
stock turnover, media coverage, Google search activity, or Bloomberg search
1 See, for example, Admati and Pfleiderer (2009), Edmans (2009), Edmans and Manso (2011), Cai, Garner, and
Walkling (2009), and Gillan and Starks (2000), among others.

Investors’ Attention to Corporate Governance
intensity.2 Second, by isolating the source of research, we can measure and

contrast attention by different types of investors.
To the best of our knowledge, we are the first to utilize a direct measure of
governance research. We start with the publicly available EDGAR server log
files, which provide a record of all activity on the EDGAR system. We focus
on viewings of companies’ proxy statements, which represent the key official

filing associated with the company’s annual meeting. We count the number of
views of these filings, over approximately 2.5 months leading up to the annual
meeting. We also consider a broader governance measure, which includes
both proxy statements and other filings viewed by the same IP address on
the same day. Finally, we construct a measure of financial research, to contrast
the determinants of alternative forms of research.
In addition to examining aggregate governance research, we also contrast
research by different investors. The EDGAR log files include partially masked
IP addresses, which do not reveal the full IP address but are sufficiently detailed
to enable us to map activity on the EDGAR servers to specific institutional
investors. For 87 mutual fund families, 3,684 unique companies, and seven
calendar years (representing 15,113 firm meetings), we can determine the
precise times each investor accessed each SEC filing for each company. We
contrast this with research by smaller investors, defined as IP addresses that
use retail focused internet service providers like AT&T, Comcast, or Verizon,
and that access less than 25 EDGAR filings in any year. This measure largely
includes a combination of retail investors and small businesses.
The EDGAR-based measures we use are not comprehensive, as investors
can also access firms’ regulatory filings through other sources, for example,
company websites, specialized providers like Bloomberg, Factset, and ISS,
and other news aggregators. For this reason, we begin with an in-depth analysis
of our EDGAR-based measure.
Empirical patterns are consistent with both theories on the general
determinants of investor attention and with predictions related specifically to
governance factors. First, governance research is different from other types
of research. We find that 15% of the variation in mutual funds’ governance-
related research is explained by the contentiousness of the items up for vote,
for example, the number of shareholder proposals, the number of proposals on
which ISS recommends against management, and the presence of a 13D filing.
In contrast, such factors explain only 1% of the variation in financial research.
Second, we find that the timing of the firm’s meeting significantly affects
investors’ research, incremental to factors such as firm size, recent firm
performance, and the contentiousness of firms’ meetings. Approximately three-
quarters of companies have a December fiscal year end, and these companies
2 See, for example, Barber and Odean (2008), Gervais, Kaniel, and Mingelgrin (2001), Hou, Xiong, and Peng
(2009), Yuan (2015), Seasholes and Guojun (2007), Ben-Rephael, Da, and Israelsen (2017), and Da, Engelberg,
and Gao (2011).

tend to have their annual meetings in what is commonly referred to as the Busy
Spring Proxy Season. Consistent with investors facing tighter time constraints
during this period, these companies receive approximately 22% less attention
than do other companies.
Third, the determinants of governance research also vary as a function of
investor type. Consistent with larger investors being better able to recoup the

costs of monitoring via their larger portfolio holdings, they conduct significantly
more governance research.
Hellwig and Veldkamp (2009) show that research can be further influenced
by coordination among investors. Their model of costly information acquisition
shows that when actions are complementary, information acquisition will be
complementary as well. If agents’ main motivation for conducting research is
improving firm governance through voting, this suggests that research efforts
across investors will be complementary. The impact of a vote is greater if others
vote in a similar manner.3 Consistent with this complementarity in voting, we
find that an investor’s governance research is positively related to expected
research by other investors. Coordination is significantly greater in cases in
which investors have a greater incentive to maximize firm value and when
recent firm performance has been poor.
Next, we focus on the extent to which investors’ governance research relates
to their interactions with the company. We link the mutual fund family viewing
the SEC filings to both shareholder voting records and portfolio holdings. We
posit that more in-depth research leads investors to update their beliefs about
the company and thus take a more active monitoring role. This generates the
prediction that governance research will have a causal effect on both voice and
exit, that is, on voting and changes in investment positions.
Following Iliev and Lowry (2015), we define informed voting as the
likelihood of the vote differing from the recommendation of the largest proxy
advisory service company, ISS. To examine causal effects, we take advantage
of the fact that incremental to other determinants of governance research,
companies whose meetings fall in the busy spring proxy season receive
significantly less attention. Using the “busy” indicator as an instrument that
captures exogenous shocks to attention, we find that investors’ governance
research significantly increases informed voting.
We expect that greater research will also lead to a higher probability of
uncovering problems at the company. We focus on the tendency of mutual
fund families to exercise their opinions through both voice and exit. First, we
investigate their propensity to vote against management, particularly on more
contentious items. Second, we examine two alternative measures of changes
in investment positions: the change in percentile ranking of a stock within
3 Matvos and Ostrovsky (2010) examine how complementarity in voting can arise from the fact that a fund’s
willingness to oppose management is positively related to expected opposition among other investors.

the investor’s portfolio, and the complete divesture of shares held. All three
measures indicate that greater research leads to increased monitoring.
Results to this point suggest that concerns regarding the current structure of
the company motivate investors to conduct more governance research, and the
increased information obtained by investors causes them to pressure companies
via both voice and exit. This generates the prediction that investor attention

to a company will pressure the company to make value-increasing changes.
Following the activism literature (see, e.g., Brav et al. 2008), we examine
changes in both firm investments and firm payouts. Consistent with empire
building representing a form of agency that a firm’s monitors strive to curtail,
we find strong evidence that increased attention to the firm has both a negative
causal effect on investment and a positive causal effect on payouts.
While these results highlight the benefits of investor attention for the
underlying firms, the concentration of research amongst certain types of firms,
combined with coordination among investors, means that a significant portion
of firms will tend to be relatively ignored. Our final set of results indicates
that the tendency to be ignored is persistent over time. A firm in the bottom
decile of governance research in year t has a 63% probability of being in one
of the bottom-two deciles in the subsequent year. This highlights the impact of
our findings. Management of a less-researched firm tends to be less stringently
monitored both this year and into the future.
Our paper contributes to several streams of literature. First, it relates to
the ways that dispersed shareholders monitor the firm and mitigate agency
costs, a question at the forefront of finance since Berle and Means (1932) and
Jensen and Meckling (1976). Existing studies have examined this question by
inferring monitoring based on outcomes around salient corporate events, such as
mergers (e.g., Shleifer and Vishny 1986; Chen, Harford, and Li 2007), or from
investor voting behavior (Matvos and Ostrovsky 2010; Iliev and Lowry 2015;
Cai, Garner, and Walkling 2008; Fos, Li, and Tsoutsoura 2018). In contrast to
these more indirect approaches, we directly measure monitoring by observing
investors’ views of companies’ filings.
Second, our paper contributes to the literature on shareholder voting and
activism. A large body of literature examines the ways that hedge funds and
shareholder activists engage in monitoring, often through aggressive means,
such as proxy fights (Klein and Zur 2008; Brav et al. 2008; Brav, Jiang, and Kim
2010), “Just Vote No” campaigns (Del Guercio, Seery, and Woidtke 2008), or
private engagements (Becht et al. 2009; McCahery, Sautner, and Starks 2016).
Far less is known about the extent of monitoring by investors, such as mutual
funds, that do not engage in such aggressive practices. Appel et al (2016) and
Schmidt and Fahlenbrach (2017) examine this issue by focusing on firms around
Russell Index cutoff points. We provide a broader and deeper perspective,
by looking across a wide set of investors and a wide set of companies and
providing direct evidence of firm monitoring. Our finding that the timing of
firms’ meetings represents a shock to investor attention enables us to make

causal inferences: investor attention influences firm outcomes in ways that are
consistent with decreased agency costs.
1. Data
Our sample consists of firms with ISS Voting Analytics, CRSP, and Compustat

data, yielding a sample of 3,684 firms. Our sample period is 2011–2017, where
the starting year of 2011 is dictated by the availability of a high-quality IP
match for mutual funds, as described below.4 Our sample includes all regularly
scheduled annual meetings for these firms.5
We compute several measures of research conducted in each of these firms.
To form these measures, we start with the full set of IP addresses that accessed
EDGAR between 2011 and 2017. Because we are primarily interested in
governance research, we concentrate on EDGAR requests in a period prior to the
shareholder meeting. Company proxy statements are typically released between
40 and 45 days prior to the meeting, but two factors potentially lead investors
to begin their research prior to this point.6 First, firm meetings are clustered
in the busy spring proxy season, leading to time constraints among investors.
Second, historical data can help contextualize current-period data (see, e.g.,
Drake, Roulstone, and Thornock 2016), suggesting that prior years’ proxy
statements can be relevant. Thus, we focus on a window beginning 30 days
prior to the release of the current year proxy statement and extending through
the annual meeting, and we include views of company proxy statements across
both current and prior years. This represents our main measure of governance
research, “Proxy views.”
We also form a broader measure of governance research, “Proxy-related
views,” which includes views of both proxy statements and any other company
filings that are accessed on the same day as a proxy statement by the same
IP address (i.e., same computer in the organization).7 This accounts for the
fact that investors may look to other sources of information, to get a fuller
understanding of the firm’s governance demands. For example, 10Ks and 8Ks
provide added detail about the firm’s operations and financial profile, which
arguably relate to the optimal skill sets of directors on the Board.
4 The EDGAR detailed log files are available through June 2017. Thus, the relatively small number of companies
with annual meetings in July through December are only included in our sample through 2016.
5 We exclude special meetings (approximately 1% of the sample). As will be described in more detail later, we
obtain identification from variation in the timing of firms’ meeting. Restricting the sample to annual meetings
adds confidence that the exclusion criteria are satisfied for these tests.
6 Within our sample, more than 62% of firm-years have proxies released between 40 and 50 days prior to the
annual meeting, with 2% or more of firm-years falling on each of the days within this window. A total of 93% of
firm-years have proxies released within the 28- to 56-day window, with approximately 1% or more of firm-years
falling on each of these days. Internet Appendix Figure A3 provides a histogram.
7 To do this, we take advantage of the fact that the masked portion of the IP address, that is, the “dgd” in
192.175.172.dgd, refers to the same true number (a number between 0 and 255) throughout the data.

For comparison purposes, we construct measures of “Financial research”

and “Bloomberg research.” Financial research represents views of 10Ks and
10Qs over the same window, starting 30 days prior to the release of the
proxy statement and continuing through the annual meeting. In supplementary
analyses, we also examine views of these filings over a window following the
release of the 10K. The Bloomberg research measure captures users’ attention

to each company on each day, based on both specific searches and the number of
times articles are read. As described in Ben-Rephael et al. (2017), Bloomberg
creates a numerical attention score each hour by comparing the average hourly
count during the previous 8 hours to all hourly counts over the previous 30 days
for each stock. Following Ben-Rephael et al. (2017), we focus on days when
attention spikes to above the 94th percentile, which we label as a Bloomberg
Intense Day. Our measure of Bloomberg research represents the number of
Bloomberg Intense Days over the 10 days prior to the firm’s annual meeting.
In addition to contrasting different measures of research, we also contrast the
research by different types of investors. First, “Aggregate” governance research
represents the total number of views across all IPs of the relevant SEC filings.
Second, we define “Small investors” as IP addresses that access the internet
through common internet service providers (e.g., AT&T, Comcast, Verizon,
COX) and who download a maximum of 25 SEC filings during the calendar
year, and we tabulate total views by this set of IP addresses. This category
should be comprised predominantly of retail investors and small businesses.8
Third, “Mutual fund” research captures the activities of larger investors that
likely devote more resources toward governance and potentially have more
influence on vote outcomes.
To form our mutual fund sample, we start with all fund families that have
voting data for more than 100 securities and that we can link to one or more IP
address blocks that accessed EDGAR in 2015. When a request is made through
the EDGAR interface (e.g., when a person reads a company filing on EDGAR),
the server records information about that request in the server log files. This
information includes the filing requested, the time and date of the request, and
the IP address of the computer that requested the filing. Following a Freedom
of Information Act (FOIA) request by the public, the SEC has made the server
log files publicly available.9 The log files represent detailed daily records of all
requests going back to 2003.
8 Internet Appendix A provides a complete list of ISPs. Small investors are interesting to separately study because
they are often surprisingly active in their voting given their limited resources (Brav, Cain, and Zytnick 2019). While
large institutional investors suffer from various conflicts of interest (Matvos and Ostrovsky 2010), Cvijanoviæ,
Dasgupta, and Zachariadis 2016), small investors are arguably less likely to suffer from such biases.
9 Early research using EDGAR log files focused on the aggregate flow of requests, for example, Bauguess, Cooney,
and Hanley (2018), Lee, Ma, and Wang (2015), Drake, Roulstone, and Thornock (2015), and Drake et al. (2017).
Several contemporaneous papers similarly identify the individual investors behind these views: Chen et al.
(2020), Cao et al. (2020), Crane, Crotty, and Umar (2019), Gibbons, Iliev, and Kalodimos (2020), and Bozanic
et al. (2017), who examine issues related to investment returns, mimicking peers’ trades, hedge funds, sell-side
analysts, and the IRS.

The SEC partially masks each IP address to protect the identity of the
requestors, by only providing three of the four octets that compose an IP
address. For example, the IP address 192.175.172.111 will be reported as
192.175.172.dgd in the server logs, where the “random” letter part dgd refers
to the true number between 0 and 255. The key insight that enables us to match
these partial IP addresses to investors is that many large investors purchase

entire blocks of IP addresses, for example, 192.175.172.0, 192.175.172.1, …,
192.175.172.255. Moreover, in cases in which a large investor owns a part
of the block, the small amount of traffic from other users arguably only adds
random noise. To match these partially masked IP addresses to investors, we use
a linking table provided by Digital Elements, which lists IP addresses and the
organizations to which these addresses are registered. We describe the process
of identifying fund families in the EDGAR log files in further detail in Internet
Appendix A.
The final step of the sample construction process is to limit the set of mutual
fund families to the subset that relies on EDGAR. While typically nonuse of
a particular data source is unobservable, a unique feature of our mutual fund
research measure is that we can filter on EDGAR reliance: we require each
fund family to look via EDGAR at a minimum of 1% of their portfolio each
quarter. To account for the fact that some investors might download all firm
filings onto a central drive for employees to access, we filter out all mass “bot”
requests (see Internet Appendix A for more detail).10 Our final sample consists
of 87 mutual fund families.11
Two issues deserve further comment. First, it is important for our study that
investors do not strategically choose to be in our data set in order to over- or
underrepresent their use of public information through EDGAR. Importantly,
because the SEC intentionally masked the IP addresses when they posted this
data set for public use, this is unlikely to be a concern. Only recently, in 2017,
researchers have started to trace this public data to blocks of IP addresses
that can be attributed to institutional investors with a relatively high degree of
precision.
Second, we cannot rule out the possibility that some investors rely on a
combination of EDGAR and other sources. In this case, the investor will be
included in our sample, but we will underestimate the extent of research they
conduct. We address this issue in a variety of ways. We begin by conducting
an in-depth analysis of our observed research measures, to assess the extent
to which the patterns are consistent with both economic fundamentals and
with inferences from prior research. Further, we include investor fixed effects
10 As will be discussed in more detail in the next section, for robustness we also consider measures that include bot
requests.
11 These 87 mutual fund families own in aggregate 30% (on average) of the companies in our sample. This compares
to total mutual fund ownership as reported by the 2017 Investment Company Institute factbook of 31%, suggesting
we are capturing most of this ownership in dollars (ICI 2018).

in many specifications, to control for variation across investors in EDGAR

reliance. As described below, while we cannot completely mitigate this concern,
multiple facets of our data suggest that they capture meaningful variation that
other proxies, such as Bloomberg attention (which is similarly sensitive to
this issue) do not. This is, in large part, because we can identify the exact
filing that each investor is viewing. Our conclusion that investors rely on

information obtained via EDGAR is consistent with the evidence of several
contemporaneous papers. For example, Chen et al. (2020), Crane, Crotty,
and Umar (2019), and Bhandari, Iliev, and Kalodimos (2020) conclude that
institutional investors and analysts rely on firm filings retrieved through the
EDGAR platform to obtain information.
2. Patterns in Investors’ Governance Research

We begin by documenting the broad patterns in investors’ governance-related
research. Figure 1 illustrates event-time patterns. Panel A plots the number
of company proxy filings viewed, for each of the 90 days leading up to the
company’s annual meeting through 30 days after the meeting. We observe a
large spike just after day −45, which is shortly after many companies’ proxy
statements are released.12 Views continue to be reasonably high (i.e., much
higher than during the day -90 to -50 window) through day 0, which is the day
of the annual meeting, and then subsequently lessen to a level similar to that of
the (−90, −50) period.
Panel B reveals similar patterns when we broaden our governance measure
to be proxy-related views, defined as views of the proxy statement plus any
other company filings viewed on the same day by the same IP address as the
proxy. Panels C and D show that patterns are even starker among mutual funds,
with more intense research through the annual meeting. This is consistent with
the fact that these entities have a fiduciary duty to vote. Similar patterns are
observed for individual mutual funds, as shown in Internet Appendix Figure A1
for Vanguard, Fidelity, and Blackrock, though the intensity and pattern vary
between mutual fund families.
At first glance, one puzzling facet of these figures is a cyclical pattern. This is
driven by the fact that Figure 1 is based on event time. Because annual meetings
tend to be on a Tuesday, Wednesday, or Thursday, we observe less research
being done on certain event days. Consistent with most people following a
Monday to Friday workweek, relatively few requests are made on Saturdays
and Sundays. Internet Appendix Figure A2 shows this strong day-of-the-week
pattern.
Panel A of Table 1 shows the distribution of research at the company meeting
level. On average, a firm’s proxy statements are viewed 659 times over the
12 Internet Appendix Figure A4 shows the proxy views relative to the time of their posting on EDGAR. These
figures more explicitly show the extreme spike in the days immediately following the filing.

A Views of proxy filings in aggregate B Views of proxy-related filings in aggregate

C Views of proxy filings by mutual fund families D Views of proxy-related filings by mutual fund families
Figure 1
Governance-related research by mutual fund families
The sample consists of either all EDGAR users (panels A and B) or all firms held by 87 mutual fund families
(panels C and D) between 2011 and 2017. For each firm-year (panels A and B) or investor-firm-year (panels C
and D), we focus on the views of the firm’s current and prior year proxy statements (panels A and C) or views
of the firm’s proxy statements and any other filings accessed by the same investor IP on the same day as a proxy
statement (panels B and D). We count the number of views of these filings from day −90 to day 30, relative to
the date of the annual meeting. We report the average total filings viewed for all mutual funds families per year.
window prior to the annual meeting, with an interquartile range of 325 to 735.
The minimum and maximum (not tabulated) are 13 and 35,140, indicating
that the distribution is highly skewed. Similar patterns exist when we restrict
research to either large investors, such as mutual fund families, or smaller
investors.
The next set of rows shows statistics for our broader measure of governance
research, proxy-related views. Comparing these statistics with those for proxy
views highlights the extent to which investors do in-depth research on a
company. For the average firm-year, aggregate proxy-related views equal 1,106,
compared to 659 for the narrower proxy views measure.
Financial research, measured as views of 10Ks and 10Qs over the same
calendar window, is much greater than governance research. For the average
firm-year, there are over 3,500 views of financial filings during this 3-month
period.
The fourth and fifth sets of rows describe firms’ financials and annual
meetings, and the sixth set describes the frequency of recent firm events that
plausibly affect investors’ monitoring. Over the 180 days prior to the annual
10

Table 1
Summary statistics
A. Firm meeting statistics (15,113 observations)
Mean SD 25th perc Median 75th perc
Governance research measures (proxy views)
Aggregate, across all IPs 659.39 785.09 325 471 735
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Mutual funds (87 families) 11.24 19.41 3 6 12
Small investors 29.00 68.80 9 16 29
Broad governance research measures (proxy-related views)
Aggregate, across all IPs 1,105.58 1,457.59 515 766 1,216
Small investors 52.91 107.09 15 28 54
Financial research measures (10K / 10Q views)
Aggregate, across all IPs 3,584.33 6,229.90 1,427 2,308 3,824

Small investors 99.96 180.99 32 56 104
Firm financial characteristics
Market-adjusted return 0.06 0.45 −0.17 0.01 0.21
Profitability 0.08 0.18 0.03 0.10 0.15
High default risk 0.03 0.18 0.00 0.00 0.00
Market value of equity ($billion) 7.33 26.18 0.40 1.22 4.03
Book leverage 0.20 0.19 0.03 0.17 0.32
R&D/assets 0.04 0.10 0.00 0.00 0.03
Cash/assets 0.80 4.45 0.04 0.11 0.34
Market to book 3.92 9.12 1.32 2.09 3.72
Tangibility 0.22 0.24 0.03 0.12 0.32
Annual meeting measures
Busy week of meetings 0.70 0.46 0.00 1.00 1.00
Number of shareholder proposals 0.20 0.70 0.00 0.00 0.00
ISS recommend against 0.10 0.18 0.00 0.00 0.13
Exempt solicitation 0.05 0.22 0.00 0.00 0.00
Revised proxy indicator 0.53 0.50 0.00 1.00 1.00
Recent company events
Proxy contest filing 0.04 0.20 0.00 0.00 0.00
13D form filing 0.17 0.37 0.00 0.00 0.00
Vote on merger (DEFM14A) 0.06 0.24 0.00 0.00 0.00
11
Page: 11
(Continued)
1–48
Table 1
Continued
B. Research by mutual funds families, Mutual fund family × Firm meeting statistics
12
Summary stats for all Cond’l on viewing
observations (405,543 obs) proxy (46,606 obs)
Mean Median SD Mean Median SD
EDGAR filings views [Proxy filing date – 30, meeting date]
Proxy views 0.30 0.00 1.87 2.60 1.00 4.95
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Proxy-related views 0.56 0.00 6.83 4.84 2.00 19.64
Ownership of 87 mutual fund families within the sample
Investment as % of firm equity 1.12 0.26 2.29 2.24 0.73 3.20
Investment as % of mutual fund family equity position 0.08 0.01 0.28 0.13 0.02 0.46
Fund family equity holdings ($billion) 210.90 53.58 382.22 396.82 216.18 447.62
Fraction index funds 0.19 0.05 0.29 0.22 0.06 0.29
C. Views across types of issues, Mutual fund family× Firm meeting statistics
% cases in which fund family Average number

views at least one proxy of proxy views
Low High Low High
Firm market value of equity (high: ≥ 28.45 billion) 10.65% 19.06% 0.24 0.78
Proxy contest filing (high: proxy contest=1) 11.29 15.14 0.28 0.58
# of shareholder proposals (high: # of proposals ≥ 1) 10.39 16.68 0.24 0.59
Exempt solicitation (high: exempt solicitation=1) 10.87 17.74 0.26 0.69
Fund family equity holdings (high: ≥ 677.73 billion) 9.87 25.90 0.26 0.61
Invt as % of fund family equity holdings (high: ≥ 0.19%) 10.84 17.33 0.26 0.68
Invt as % of firm equity (high: ≥ 3.26%) 9.49 29.49 0.25 0.73
In panel A, the sample consists of 15,113 firm meetings between 2011 and 2017. Governance research (“Proxy Views”) includes views of the company’s current and prior year proxy
statements, from 30 days prior to the release of the current year’s proxy statement through the annual meeting. Broad governance research (“Proxy-Related Views”) include views of
both proxy statements and any other company filings that are accessed on the same day as a proxy statement by the same IP address. Financial research (“10K/10Q Views”) includes
views of 10Ks and 10Qs, over the same period. Aggregate research includes views across all IP addresses of these filings. Mutual fund research includes views by 87 mutual fund
families, conditional on them owning shares in the firm. Small investor research includes views by IP addresses that use one of the primary retail internet service providers (e.g., Comcast,
Verizon, as defined more fully in Internet Appendix A) and accessed fewer than 25 EDGAR filings during the year. Panel B is restricted to the unbalanced panel of 87 mutual fund
families × firms owned by each fund family, between 2011 and 2017, a total of 405,543 observations. The left-hand columns represent this full sample, and the right-hand columns limit
the sample to the 46,606 investor × firm meetings in which the investor accessed the firm’s current or prior year proxy statement at least once. Panel C consists of the same sample
as the full sample in panel B. Each row divides the sample of 405,543 mutual fund family × firm meeting observations into two groups based on the designated variable. For rows
Page: 12
where the variable is continuous (Market value of equity, Number of shareholder proposals, Fund family equity holdings, Investment as a % of mutual fund family equity holdings and
Investment as % of firm equity), the high (low) category represents observations above (below) the 90th percentile. For rows where the variable is an indicator (Proxy contest, Exempt
1–48
solicitation), the high (low) category represents observations in which this variable equals one (zero). Left-hand columns show the number of mutual fund family × firm observations in
which the mutual fund family viewed at least one proxy statement, and the right-hand columns show the average number of proxies viewed. Table A1 in the appendix defines the variables.

meeting, 4% of firm-year observations have a proxy contest filing, 17% have a

13D filing, and 6% have a merger-related filing.
Panel B focuses on the mutual fund family research measures, where we
can identify the specific fund family viewing the filings. The first four columns
describe the total data, that is, the proxy-related views of all 87 mutual fund
families in all firms that they own across 7 calendar years, a total of 405,543

observations. The next three columns describe the subsample of observations
where an investor viewed a firm proxy. Focusing on our main governance
measure, mutual fund families on average viewed 0.30 proxy statements per
firm over the approximately 80-day window preceding the annual meeting.
This average consists of many zeros (cases of investors viewing zero proxy
statements) combined with a small number of cases in which investors conduct
a substantial amount of research on a firm.13 Approximately 11.5% of investor-
firm pairs had at least one request, and conditional on having at least one view
the mean number of views is 2.60. A comparison of this statistic with the
average 4.84 views of proxy-related filings highlights the extent to which these
investors consult other filings.
Depending on one’s priors, the finding that mutual fund families access the
proxies of 11.5% of their holdings (via the EDGAR platform), on average,
may seem either high or low. Panel C of Table 1 highlights the extent to which
this rate varies as a function of meeting, firm, and investor characteristics. For
characteristics that are indicator variables (e.g., proxy contest), we compare
views across firm meetings with versus without such events. For characteristics
that are continuous variables (e.g., firm market value of equity), we split the
sample at the 90th percentile. The percentage of mutual fund family × investor
observations with one or more proxies viewed is concentrated among larger
firms (19.1% vs. 10.7%), more contentious meetings as categorized by a proxy
contest (15.1% vs. 11.3%), larger fund families (25.9% vs. 9.9%), and when
the investment is a larger portion of firm equity (29.5% vs. 9.5%).
Figure 2 provides a broader perspective on the concentration of research. We
compare the hypothetical distribution of investors’ proxy views if each investor
had an equal probability of viewing each firm in her portfolio each year, with
the actual distribution of investors’ views.14 As depicted with the dashed black
line, under the hypothetical distribution 20.1% of firm-years have views by zero
or one investor, and 0.23% would receive attention from 10 or more investors
in our sample. In stark contrast to this hypothetical distribution, the solid line
shows that the actual distribution is much more skewed. Many more firm-years
lie at the extremes, with either very few views (32.7% with either zero or one
13 In regression analyses, we account for skewness in the research measures by both using logged measures and
through specifications where we focus on whether an investor conducted any research on a firm.
14 This simulation accounts for differences in each investor’s propensity to view firm filings, but randomly assigns
the investor’s views across its portfolio firms each year.
13


Figure 2
Governance-related research by mutual fund families
This figure shows the distribution of meetings with different numbers of investors performing research (the solid
line) and the simulated distribution of investors’ research based on 1,000 random draws from the actual research
each investor did across each year (the dashed line). Hence, in the simulated distribution, Vanguard research for
a firm in 2015 will be randomly drawn from the Vanguard research on all firms in 2015. A mutual fund family
is defined as conducting research on a firm if it views the firm’s current or prior year proxy statement, from 30
days prior to the release of the current year proxy statement through the date of the annual meeting. The gray
area represents a 98% confidence interval around the median value (the area between the 1% and 99% of the
simulated distribution of meetings with a given number of active investors).
view) or many more views (5.5% of firms receive attention by 10 or more

investors) than the hypothetical random assignment.
3. Determinants of Governance-Related Research by Investors

Incentives to conduct governance research should be positively related to the
benefits of such information and negatively related to the costs of obtaining it.
This basic economic premise generates predictions related to the types of firms
in which investors focus their attention, to differences across investors, and to
differences between governance- versus financial-related research. Section 4.1
focuses on these issues. Section 4.2 examines investor characteristics in more
depth, by focusing on research by individual mutual fund families identified by
linking their IP addresses, as described above. Section 4.3 investigates whether
investors coordinate their research in the same firms, versus differentiate their
attention from other investors’ research.
14

A By the firm’s market capitalization B By the firm’s rank in investor’s portfolio

C By percentage of the firm’s equity held D By firm returns
Figure 3
Investors’ governance-related research by firm type and investor type
The sample consists of an unbalanced panel of the firm holdings for five specific mutual fund families, between
2011 and 2017. The five mutual fund families are Blackrock, Vanguard, Fidelity, State Street, and T. Rowe Price,
as they each own nearly every firm in the market. For each investor × firm meeting, we focus on the investor’s
views of the firm’s current and prior year proxy statements. We count the number of views of these filings, from
30 days prior to the release of the current year proxy statement through the date of the annual meeting. In panel
A, we place observations into quintiles based on firm market capitalization measured at the end of the last fiscal
year, where quintile 5 includes the largest firms. In panel B (C), for each investor × firm meeting, we rank each
firm based on the weight in the fund family’s portfolio (investor’ ownership as a percentage of total firm market
capitalization) at the end of the quarter preceding the annual meeting. Quintile 5 represents observations with
the greatest weight. In panel D, we form quintiles based on firms’ market-adjusted returns over the fiscal year
preceding the meeting (firm return minus the value-weighted CRSP index return), where quintile 5 includes firms
with the highest abnormal returns. In each case, we plot the average number of views of current and prior year
proxy statements, over the window beginning 30 days prior to the release of the current year proxy statement
and continuing through the annual meeting, across each quintile.
3.1 Effects of firm characteristics on investors’ governance research

Panel C of Table 1 showed that investors focus their research on larger firms,
on more contentious meetings, and in firms where their investment is larger.
Figure 3 highlights the strength of several of these relations. For four different
continuous variables, we place firms into quintiles and tabulate average views
across each quintile. To ensure results are not influenced by the decision to
invest in the firm, we focus on holdings of the top-five mutual fund families
in our sample, as they own essentially every firm in the market. Looking first
at panel A, one sees that views are monotonically increasing across firm size
quintiles. Top-five mutual fund investors view an average of 0.3 proxy filings
per firm within the smallest market capitalization quintile, compared to 1.0
15

within the top quintile. Panels B and C show similar monotonic relations when
we categorize firms by the firm’s rank within each investor’ portfolio, and by
the percentage of the firm’s equity held. However, somewhat surprisingly, we
find no relation with firm returns. We conjecture that the influence of firm
performance is masked by the size-related factors.
We turn to regression analysis in Table 2 to examine these patterns, as well as

many other factors, in more depth. We examine the unique focus of governance
research compared to financial research and broader measures of attention to the
firm, and we contrast research across large versus small investors. In columns
1 to 5, the sample consists of 15,113 firm meetings across 3,684 unique firms,
and in column 6 the availability of Bloomberg data limits the sample to 10,547
firm meetings. Regressions include industry and year fixed effects.
We focus on the extent to which investors’ research relates to four basic
factors: recent firm performance, firm size and financial characteristics, the
timing of the firm meeting, and firm governance and control. These factors
relate to investors’ relative costs and benefits of research. We predict that the last
category, firm governance and control, will be strongly related to governance
research, but less strongly related to financial research. This category includes
factors that capture the contentiousness of items up for vote: ISS Against
recommendations, the number of shareholder proposals, an exempt solicitation
filing indicator, and a proxy contest filing indicator. Exempt solicitations are
filed when an investor petitions up to 10 shareholders to vote in a particular
way, and proxy contests represent cases in which an investor solicits more than
10 shareholders. We include an indicator for whether a revised proxy statement
was filed, as this often represents cases in which management adds information
in an effort to sway a vote in a particular direction.15 Finally, we include two
variables to capture changes in the ownership structure of the firm: a dummy
for whether a 13D form has been filed within the past 180 days, indicating
the presence of an activist investor with a 5% or more ownership stake, and
a dummy for whether the firm filed a DEFM14A (or DEFM14C) within the
past 180 days, indicating the presence of a merger or acquisition on which
shareholders are required to vote.
Looking first at column 1, one sees that the dependent variable is the
log of one plus proxy views across all IP addresses, which includes all
market participants and other stakeholders using the EDGAR platform to
access company disclosures. Aggregate governance research is significantly
related to all four factors: recent firm performance, firm size and financial
characteristics, the timing of the firm’s meeting, and firm governance. A one-
standard-deviation increase in firm size is associated with 41.2% more research,
and a firm with high default risk receives 20.1% more research. In terms of
governance factors, a firm with a proxy contest filing receives 32.9% more
15 For example, Bhandari, Iliev, and Kalodimos (2020) show that management uses outreach in the form of letters
or investor presentations in expected close elections for proxy access.
16

Table 2
Determinants of governance research, compared to other research
Type of research Governance (proxy views) Financial (10K / 10Q views) Bloomberg
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Research by Aggregate Mutual fund Small inv’s Aggregate Mutual fund All
Firm performance
Market-adjusted −0.0766∗∗∗ −0.0970∗∗∗ −0.0541∗∗∗ −0.0665∗∗∗ −0.0792∗∗∗ 0.0102
return (0.007) (0.013) (0.014) (0.010) (0.015) (0.020)
Profitability −0.1906∗∗∗ −0.2506∗∗∗ −0.3706∗∗∗ −0.2368∗∗∗ −0.0478 −0.2095∗∗
(0.034) (0.050) (0.068) (0.036) (0.054) (0.084)
High default risk 0.1830∗∗∗ 0.2533∗∗∗ 0.3584∗∗∗ 0.2747∗∗∗ 0.4084∗∗∗ 0.3796∗∗∗
(0.021) (0.036) (0.037) (0.027) (0.045) (0.071)

Firm size & financial characteristics
ln(Mkt value equity) 0.2018∗∗∗ 0.2756∗∗∗ 0.2215∗∗∗ 0.2534∗∗∗ 0.4645∗∗∗ 0.2392∗∗∗
(0.003) (0.004) (0.005) (0.003) (0.005) (0.008)
Book leverage −0.0214 0.2214∗∗∗ −0.0268 0.1037∗∗∗ 0.8791∗∗∗ 0.0551
(0.019) (0.036) (0.037) (0.026) (0.043) (0.053)
R&D/assets −0.0777 −0.0340 0.1535 −0.2408∗∗∗ 0.0885 0.6334∗∗∗
(0.051) (0.091) (0.100) (0.059) (0.097) (0.153)
Cash/assets −0.0028∗∗∗ −0.0016 −0.0019 −0.0041∗∗∗ −0.0036∗∗ 0.0042∗
(0.001) (0.002) (0.001) (0.001) (0.002) (0.002)
Market to book −0.0014∗∗∗ −0.0018∗∗∗ −0.0008 −0.0013∗∗∗ −0.0025∗∗∗ −0.0018∗∗
(0.000) (0.001) (0.001) (0.000) (0.001) (0.001)
Tangibility −0.0109 −0.1891∗∗∗ −0.0154 0.0736∗∗∗ 0.0004 0.0693
(0.020) (0.036) (0.039) (0.027) (0.045) (0.053)
Timing of firm meeting
Busy week −0.2503∗∗∗ −0.1680∗∗∗ −0.1281∗∗∗ −0.2601∗∗∗ −0.0435∗∗∗ −0.0338∗
(0.007) (0.013) (0.013) (0.010) (0.015) (0.019)
(Continued)
17
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1–48
18
Table 2
Continued
Type of research Governance (proxy views) Financial (10K / 10Q views) Bloomberg
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Governance factors
# of shareholder props 0.1434∗∗∗ 0.1209∗∗∗ 0.2034∗∗∗ 0.1591∗∗∗ 0.0136 0.0858∗∗∗
(0.007) (0.010) (0.011) (0.009) (0.012) (0.021)
ISS rec. against −0.0869∗∗∗ 0.2570∗∗∗ 0.0444 −0.0520∗∗ −0.0831∗∗ 0.0008
(0.019) (0.034) (0.035) (0.024) (0.040) (0.045)
Exempt solicitation 0.1664∗∗∗ 0.1921∗∗∗ 0.2466∗∗∗ 0.1385∗∗∗ 0.0168 0.0878
(0.018) (0.029) (0.032) (0.024) (0.035) (0.055)
Revised proxy 0.2794∗∗∗ 0.2146∗∗∗ 0.1625∗∗∗ 0.1029∗∗∗ 0.1351∗∗∗ 0.0485∗∗∗

indicator (0.007) (0.012) (0.013) (0.009) (0.015) (0.017)
Proxy contest filing 0.2837∗∗∗ 0.2823∗∗∗ 0.2748∗∗∗ 0.1342∗∗∗ 0.1493∗∗∗ 0.0309
(0.019) (0.032) (0.030) (0.021) (0.033) (0.048)
Has 13D form 0.0838∗∗∗ 0.1858∗∗∗ 0.1855∗∗∗ 0.0496∗∗∗ 0.1578∗∗∗ 0.0358
(0.009) (0.016) (0.016) (0.011) (0.019) (0.024)
Vote on merger 0.0998∗∗∗ 0.1540∗∗∗ 0.1562∗∗∗ 0.0217 −0.0075 0.0214
(DEFM14A) (0.013) (0.026) (0.024) (0.017) (0.029) (0.044)
Fixed effects Indus, year Indus, year Indus, year Indus, year Indus, year Indus, year
Adj. R -squared .707 .439 .380 .668 .577 .251
Observations 15,113 15,113 15,113 15,113 15,113 10,547
The sample consists of 15,113 firm meetings between 2011 and 2017. In columns 1–3, the dependent variable is governance research, defined as the log of one plus views of the
company’s current and prior year proxy statements, from 30 days prior to the release of the current year’s proxy statement through the annual meeting. In columns 4 and 5, the
dependent variable is financial research, defined as the log of one plus views of 10Ks and 10Qs, over the same period. Mutual fund research (columns 2 and 5) includes views by
87 mutual fund families, conditional on them owning shares in the firm. Small investor research (column 3) includes views by IP addresses that use one of the primary retail internet
service providers (e.g., Comcast, Verizon, as defined more fully in Internet Appendix A) and accessed fewer than 25 EDGAR filings during the year. In column 6, the dependent
variable is defined as the number of days of Intense Bloomberg search for the company over the 10 days prior to the annual meeting, as defined further in the text. Industry and
year fixed effects are included in all models. Table A1 in the appendix defines the variables. Robust standard errors are reported in parentheses. *p < .1; **p < .05; ***p < .01.
Page: 18
1–48
research, and a one-standard-deviation increase in the number of shareholder

proposals is associated with 10.5% more research.16 Conditional on the firm’s
financials and governance, the timing of the meeting also plays a significant
role. Approximately 75% of firms have December fiscal year ends, and these
firms have their meetings during the busy spring proxy season. We define the
busy proxy season as the 18th to 24th weeks of the calendar year. All else held

constant, firms with meetings during this period receive 22.2% fewer proxy
views.
Table 3 shows a variance decomposition matrix, which facilitates a
comparison of the relative contribution of each group of factors, in
explaining total governance research. We find that the “firm size and financial
characteristics” category explains the largest portion, 38.1% of the total
variation in governance research. Within this category, firm size is the only
factor (of six) that really matters, explaining 37.9% of the total variation.
Governance factors explain 15.3% and the timing of the meeting explains 6.7%
of the variation.
Columns 2 and 3 of Table 2, and the associated variance decomposition in the
analogous columns of Table 3, show that the determinants of research are largely
similar across both large mutual funds and smaller investors. Column 2 focuses
on the 87 mutual fund families in our sample, all of which have a fiduciary
duty related to the governance of the firm (through voting), while Column 3
includes predominantly retail and small businesses. The first takeaway is that
the contentiousness of items up for vote plays a similarly positive role among
both groups. The relevance of this factor for retail investors is consistent with
the findings of Brav, Cain, and Zytnick (2019) that these shareholders are more
likely to participate in more contentious elections. Firm performance and firm
financial characteristics, in particular firm size, are also similarly important
across the two groups. In sum, while a large body of literature highlights the
uniqueness of institutional monitoring, in fact, many similarities exist between
the monitoring of different types of investors.
Columns 4 and 5 of Table 2 and the associated variance decomposition in
Table 3 show that the determinants of financial research (measured as views
of 10Ks/10Qs) are fundamentally different. Most stark is the influence of
governance factors: they explain 14%–18% of the variation in governance
research, compared to only 1%–4% of financial research. While many of the
16 Because the dependent variable represents ln(1+Views), and we want to measure the implied change in views,
economic significance is calculated as follows. For a continuous independent variable, such as firm size (which
is measured as market value of equity), the regression model implies that ln(1 + Views with 1-SD increase in log
Firm Size) - ln(1+ Views at Sample Mean) = coefficient for Firm Size * 1-SD increase in log of Firm Size. Within
our sample, the average number of views is 659.39, and the standard deviation of log Firm Size is 1.707. Solving
this equation, a one-standard-deviation increase in firm size results in views of 931.46, which represents a 41.2%
increase relative to the average firm years. For an indicator variable, such as proxy contest: ln(1 + Views in years
with proxy contest) – ln(1+ Views in nonproxy contest firm-years) = coefficient for proxy contest. Within our
sample, views for nonproxy contest firm-years equal 631.64. Solving this equation, we find that views for firm
years with a proxy contest equal 839.42, which represents a 32.9% increase relative to other firm years.
19

20
Table 3
Variance decomposition
Type of research Governance (proxy views) Financial (10Ks/10Q views) Bloomberg
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Market-adjusted return 0.58% 0.90% 0.33% 0.25% 0.20% 0.01%
Profitability 0.29% 0.48% 1.24% 0.25% 0.01% 0.31%
High default risk 0.48% 0.88% 2.08% 0.61% 0.78% 2.01%
Fin’l perf. total: 1.34% 2.26% 3.65% 1.11% 0.99% 2.33%
ln(Mkt value of equity) 37.88% 68.27% 52.08% 34.11% 66.07% 64.03%
Book leverage 0.01% 0.65% 0.01% 0.08% 3.50% 0.05%
R&D/assets 0.01% 0.00% 0.06% 0.08% 0.01% 0.91%
Cash /assets 0.07% 0.02% 0.04% 0.09% 0.04% 0.17%
Market to book 0.08% 0.13% 0.03% 0.04% 0.08% 0.18%

Tangibility 0.00% 0.44% 0.00% 0.04% 0.00% 0.07%
Firm size & fin’ls total: 38.06% 69.51% 52.22% 34.43% 69.69% 65.41%
Busy week of meetings 6.68% 2.91% 1.99% 4.12% 0.07% 0.15%
Meeting time total: 6.68% 2.91% 1.99% 4.12% 0.07% 0.15%
# of shareholder proposals 3.43% 2.36% 7.88% 2.41% 0.01% 1.99%
ISS rec. against 0.12% 1.02% 0.04% 0.02% 0.04% 0.00%
Exempt solicitation 0.54% 0.69% 1.35% 0.21% 0.00% 0.23%
Revised proxy indicator 8.64% 4.92% 3.33% 0.67% 0.66% 0.34%
Proxy contest filing 1.75% 1.67% 1.87% 0.22% 0.16% 0.03%
Has 13D form 0.51% 2.43% 2.85% 0.10% 0.60% 0.11%
Vote on merger (DEFM14A) 0.29% 0.67% 0.81% 0.01% 0.00% 0.02%
Gov’ce total: 15.28% 13.75% 18.13% 3.65% 1.47% 2.70%
Year fixed effects 34.94% 6.14% 9.22% 43.93% 5.78% 19.11%
Industry fixed effects 3.70% 5.44% 14.78% 12.75% 22.01% 10.30%
All 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
This table shows a variance decomposition of regressions in the corresponding columns of Table 2. Each entry in the table represents the Type III partial sum
of squares for that independent variable (or set of independent variables in the case of fixed effects), normalized by the sum across all effects. Within each
column, the sum of effects equals one. We also tabulate the sum of effects in different categories, for example, financial performance total and firm financials total.
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1–48
coefficients on the governance factors are statistically significant in explaining

financial research, the relative magnitudes are much lower. For example, a
one-standard-deviation increase in the number of shareholder proposals is
associated with a 10.5% increase in aggregate governance research, compared
to a 0.96% increase in aggregate financial research.
Finally, column 6 of Table 2 examines the determinants of Bloomberg atten-

tion, which as described previously equals the number of Bloomberg Intense
Days (denoting high attention to the company) over the 10 days prior to the
firm’s annual meeting. Consistent with this measure capturing overall attention
to the company, rather than governance-specific research, we observe little evi-
dence that it is positively related to the contentiousness of the items up for vote.
Tables A1 and A2 of the Internet Appendix show that conclusions regarding
the determinants of governance research are similar if we use the broader proxy-
related views, and if we measure either financial research or Bloomberg research
over alternative windows. For example, we measure financial research as views
of 10Ks/10Qs over the 60 days following the release of the annual report, and
Bloomberg attention as the number of intense search days over the 10 days fol-
lowing the release of the proxy instead of the days preceding the annual meeting.
In sum, the results in Tables 2 and 3 provide several takeaways. First,
views of governance-related filings on EDGAR are significantly related to
the contentiousness of the items up for vote. Second, the determinants of
this governance research are distinct from those of financial research. In
addition to being of interest in their own right, these patterns provide additional
confirmation that this measure picks up relevant governance research. Finally,
a third takeaway is that the timing of the firm’s meeting has a strong influence
on governance research.
3.2 Effects of investor characteristics on governance research

Table 4 builds on findings in Tables 2 and 3, by taking advantage of the unique
feature of our data whereby we can identify the specific investor accessing each
firm’s filings. We estimate panel regressions of mutual fund research, where
the sample represents an unbalanced panel consisting of all 87 mutual fund
families in our sample and all firms owned by each family over the 2011 to
2017 period. This yields a sample of 405,543 investor-firm-year observations.
In column 1, the dependent variable is our main measure of governance
research, proxy views, and in column 2 we use our broader measure, proxy-
related views. In columns 3 and 4, we take advantage of the extra investor-level
detail within the mutual fund sample to examine the extensive and intensive
margins of research.17 As discussed earlier, mutual fund families on average
only conduct governance research in 11.5% of firm-years, meaning columns 1
17 Without the IP-address-investor link, one cannot identify the set of IP addresses that belong to a single investor;
thus, one can only determine whether a particular IP address conducted research, as opposed to a particular
investor.
21

22
Table 4
Where do mutual fund investors conduct governance-related research?
Proxy-related Proxy views Proxy views
Proxy views views extensive margin intensive margin
Investor characteristics
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Investment as % of firm equity 0.0200∗∗∗ 0.0229∗∗∗ 0.0182∗∗∗ 0.0068∗∗∗
(0.000) (0.001) (0.000) (0.001)
Investment as % of fund family 0.0234∗∗∗ 0.0233∗∗∗ 0.0111∗∗∗ 0.0189∗∗
equity holdings (0.004) (0.005) (0.003) (0.008)
ln(Fund family equity holdings) 0.0241∗∗∗ 0.0287∗∗∗ 0.0212∗∗∗ 0.0288∗∗∗
(0.000) (0.000) (0.000) (0.001)
Fraction index funds −0.0398∗∗∗ −0.0512∗∗∗ −0.0210∗∗∗ −0.1971∗∗∗
(0.002) (0.002) (0.002) (0.009)
Firm performance
Market-adjusted return −0.0109∗∗∗ −0.0115∗∗∗ −0.0070∗∗∗ −0.0325∗∗∗
(0.002) (0.002) (0.001) (0.006)
Profitability −0.0573∗∗∗ −0.0731∗∗∗ −0.0402∗∗∗ −0.1057∗∗∗
(0.007) (0.009) (0.005) (0.023)
High default risk 0.0386∗∗∗ 0.0508∗∗∗ 0.0277∗∗∗ 0.0566∗∗∗
(0.005) (0.006) (0.004) (0.015)
Firm size & financial characteristics
ln(Mkt value of equity) 0.0265∗∗∗ 0.0321∗∗∗ 0.0197∗∗∗ 0.0493∗∗∗
(0.001) (0.001) (0.000) (0.002)
Book leverage 0.0129∗∗∗ 0.0252∗∗∗ 0.0117∗∗∗ 0.0322∗∗
(0.005) (0.006) (0.003) (0.016)
R&D/assets −0.0363∗∗∗ −0.0406∗∗∗ −0.0257∗∗∗ −0.0429
(0.012) (0.015) (0.009) (0.043)
Cash/assets −0.0004∗∗ −0.0005∗∗ −0.0003∗ −0.0011∗
(0.000) (0.000) (0.000) (0.001)
Market to book −0.0002∗∗∗ −0.0003∗∗∗ −0.0002∗∗∗ −0.0006∗∗
(0.000) (0.000) (0.000) (0.000)
Tangibility −0.0214∗∗∗ −0.0296∗∗∗ −0.0130∗∗∗ −0.0556∗∗∗
(0.004) (0.006) (0.003) (0.016)
(Continued)
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1–48
Table 4
Continued
Proxy-related Proxy views Proxy views
Proxy views views extensive margin intensive margin
Timing of firm meeting
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Busy week of meetings −0.0208∗∗∗ −0.0254∗∗∗ −0.0156∗∗∗ −0.0398∗∗∗
(0.002) (0.002) (0.001) (0.006)
Governance factors
# of shareholder proposals 0.0195∗∗∗ 0.0214∗∗∗ 0.0115∗∗∗ 0.0185∗∗∗
(0.002) (0.002) (0.001) (0.004)
ISS rec. against 0.0481∗∗∗ 0.0561∗∗∗ 0.0341∗∗∗ 0.1242∗∗∗
(0.005) (0.006) (0.003) (0.016)
Exempt solicitation 0.0206∗∗∗ 0.0246∗∗∗ 0.0125∗∗∗ 0.0345∗∗∗

(0.005) (0.005) (0.003) (0.012)
Revised proxy indicator 0.0186∗∗∗ 0.0204∗∗∗ 0.0077∗∗∗ 0.1064∗∗∗
(0.001) (0.002) (0.001) (0.005)
Proxy contest filing 0.0370∗∗∗ 0.0429∗∗∗ 0.0213∗∗∗ 0.0900∗∗∗
(0.005) (0.006) (0.003) (0.015)
Has 13D form 0.0267∗∗∗ 0.0360∗∗∗ 0.0172∗∗∗ 0.0612∗∗∗
(0.002) (0.003) (0.002) (0.008)
Vote on merger (DEFM14A) 0.0115∗∗∗ 0.0160∗∗∗ 0.0079∗∗∗ 0.0272∗∗
(0.004) (0.005) (0.002) (0.012)
Fixed effects Industry, year Industry, year Industry, year Industry, year
Adj. R -squared .076 .066 .074 .104
Observations 405,543 405,543 405,543 46,606
The sample consists of an unbalanced panel of 87 mutual fund families × firms owned by each fund, between 2011 and 2017. For each investor × firm meeting, the dependent
variable in column 1 equals the log of one plus the investor’s views of the firm’s current and prior year proxy statements. In column 2, the dependent variable is proxy-related
views, defined as the log of one plus views of both proxy statements and any other company filings that are accessed on the same day as a proxy statement by the same
IP address. In column 3, the dependent variable is an indicator variable equal to one if the investor viewed one or more firm proxies and zero otherwise. In column 4, the
sample is restricted to observations in which the investor viewed at least one firm proxy, and the dependent variable is the log of one plus the investor’s views of the firm’s
current and prior year proxy statements. We count the number of views of these filings, from 30 days prior to the release of the proxy statement through the date of the annual
meeting. Table A1 in the appendix defines the variables. Industry and year fixed effects are included. Standard errors are clustered by firm-meeting. *p < .1; **p < .05; ***p < .01.
23
Page: 23
1–48
and 2 regressions include many zeros. Independent variables include measures

from Table 2, plus investor-level variables that we can uniquely measure in this
sample. Standard errors are clustered at the company annual meeting level, and
industry and year fixed effects are included.
Findings highlight the role of investor characteristics. First, indexers do
significantly less research. This is consistent with governance factors relating to

future expected performance and therefore more active investors undertaking
01 more governance research as an input into portfolio decisions. Moreover, active
investors compete, to a lesser degree, on fees and thus might afford more
Mareeswaran M
resources to governance research. However, it is inconsistent with the claim
often made by indexers that they are more engaged with firms, as improving
firm governance is one of their main mechanisms for increasing portfolio value.
A one-standard-deviation increase in the fraction of fund family assets in index
funds is associated with a 5.0% decrease in the amount of proxy views. In
today’s markets, where a greater portion of investments is moving into passive
investment strategies, this lower monitoring may be cause for concern.
Further analysis shows that index funds focus their efforts where they can
have the biggest impact. Because index funds are prohibited from pressuring
companies through the threat of exit, voice is their only mechanism. Consistent
with this, Internet Appendix A3 shows that indexers focus their research on
cases in which voice can play a greater role, specifically when there are more
shareholder proposals, when ISS recommends against more issues, when there
is a 13D form, and when there is an exempt solicitation filing.
We also find that investors conduct significantly more research on their larger
positions, measured as dollar holdings as a percentage of mutual fund family
total equity holdings. Information acquisition is motivated by the expected
benefits from the associated actions, in this case influencing firms in ways
that contribute to higher shareholder value. The fund has incentives to focus
on its largest positions where the same company-level increase translates into
the largest dollar gain for the fund. Controlling for all other determinants, a
firm at the 99th percentile of fund family equity holdings receives 12.5% more
research than a firm at the 1st percentile. Research is also positively related to
dollar holdings as a percentage of firm equity, consistent with an investor having
greater ability to influence the firm in cases in which its ownership is greater. A
one-standard-deviation increase is associated with 20.3% more proxy views.18
Fund family total equity holdings is also among the important factors in
economic magnitude. As discussed by Iliev and Lowry (2015), there are
economies of scale in governance research: larger investors can spread the costs
of research over a wider asset base, and any gains in terms of higher returns
18 Across all factors, results are similar using the broader proxy-related views, though economic significance levels
are generally lower. For example, a one-standard-deviation increase in the dollar holdings as a percentage of
firm equity is associated with 15.1% more proxy-related views (compared to 20.3% more proxy views). This is
consistent with this more in-depth measure also picking up some more financially motivated research, which is
less sensitive to the governance factors on which we focus.
24

are magnified by the wider asset base. A one-standard-deviation increase in the

logarithm of total equity holdings is associated with 28.4% more proxy views.
Finally, consistent with earlier results, research is also significantly lower
among companies with annual meetings during the busy spring proxy season.
The t-statistic on the busy week indicator is approximately 13. In economic
terms, a mutual fund investor conducts 8.7% less research among firms whose

meetings fall into this period.
Columns 3 and 4 show that results are largely consistent along both the
extensive and intensive margins. Investors are less likely to conduct research
on firms whose meetings fall into the busy spring proxy season, and conditional
on conducting some research they do significantly less. Analogously, investors
are significantly more likely to conduct research on their larger holdings, and
conditional on some research the magnitude is significantly greater in these
cases.
Additional analyses ensure the robustness of findings and mitigate concerns
related to unobserved heterogeneity. First, we include investor fixed effects,
to ensure results are not biased by a tendency of some investors to conduct a
larger portion of their research on the EDGAR platform, compared to other
investors. Second, we include firm fixed effects and alternatively meeting fixed
effects. Results show that both investor characteristics and governance factors
drive significant within-firm and within-meeting variation in research. Internet
Appendix Table A4 shows these specifications. Internet Appendix Table A5
shows the robustness to alternative measures of the dependent variable, where
we include views by bots (defined as a single IP address viewing 1,000 or more
filings within a single day).
3.3 Coordination among investors

Results to this point highlight the extent to which research is concentrated within
certain types of firms. This section focuses on whether interactions between
investors contribute to further concentration.
Hellwig and Veldkamp (2009) show theoretically how an agent’s acquisition
of costly information depends on the purpose of this information. When agents’
actions are complementary, their information acquisition is complimentary as
well. However, the model suggests that the converse is also true. When an
agent benefits by taking an action different from others, that agent wants to
obtain information that the other agents do not have. To the extent that agents’
main motivation for conducting research is to improve the firm’s governance
through engagement and voting, we expect research efforts across investors to
be complementary, that is, for investors to focus their research on the same
firms. Alternatively, if agents’ main motivation for conducting governance
research is trading, for example, to exit firms with inferior governance, investors
should concentrate their research on different firms; the gains from identifying
a mispricing are greater if others do not simultaneously recognize the same
issue.
25

We empirically test these ideas using the mutual fund sample, where we can
clearly identify research by each investor. The sample consists of all mutual
fund × firm meetings, and the dependent variable is a dummy variable equal
to one if the mutual fund family views one or more proxies of the firm during
the window prior to its annual meeting. The independent variable of interest is
Other investors expected research, which is defined using an approach similar

to that of Matvos and Ostrovsky. Motivated by the high persistence of mutual
funds’ research, for each fund family, we define expected research of a mutual
fund as the percentage of its holdings for which it conducted research in the
prior year. For each fund family×firm meeting observation, Other investors
expected research is the ownership-weighted expected research of all other
fund families. Weights are based on ownership for the current year, that is, the
quarter-end prior to the meeting. Regressions include all control variables and
fixed effects used in Table 4, as well as investor fixed effects.19
Table 5 examines the average level of coordination across the whole sample,
as well as the differential effects across various subsamples. Column 1 of
Table 5 provides weak evidence of coordination of research, as evidenced by
the positive coefficient on other investors’ expected research (p-value = .103).
This is consistent with governance research being primarily motivated by
engagement and informed voting, and trading motivations potentially playing
a secondary role. Subsequent columns examine coordination in more depth,
through interaction terms that focus on cases in which coordination is expected
to be stronger.
Columns 2 and 3 focus on cases in which an investor’s benefits of a vote
are particularly large, as proxied by Firm ownership as a percentage of total
fund family equity holdings and Firm ownership as a percentage of total firm
market capitalization. We create a dummy equal to one if each variable is above
the 90th percentile and zero otherwise. Investors with greater holdings have a
greater incentive to monitor the firm, and they have a greater impact on the vote
outcome. To the extent that there are benefits in coordinating these actions,
as suggested, for example, by Brav, Dasgupta, and Mathews (2019), investors
should be more likely to coordinate their research in these cases.20 Results
are consistent with these predictions. The interaction between Other investors
expected research and each of these variables is positive and significant at the
1% level.
Columns 4 and 5 focus on cases in which the firm has performed poorly,
which can motivate investors to evaluate whether poor governance and the
associated higher agency costs have been contributing factors, and to potentially
increase their level of monitoring. Results are consistent with this intuition. The
19 As shown in Internet Appendix Table A7, results are largely similar using continuous measures of research.
20 The lower ability of these investors to govern via exit, for example, because of price pressure effects of selling
such large stakes, means their governance research is less likely to be motivated by trading. As noted by Hellwig
and Veldkamp, this decreases their incentives to differentiate their research.
26

Table 5
Coordination in research
Dep’t variable = View proxy indicator
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Other investors’ expected governance research 0.0181 0.0081 0.0166 0.0229∗∗ 0.0313∗∗∗
(0.011) (0.011) (0.011) (0.011) (0.012)
Other investors’ expected governance research 0.1104∗∗∗
× High investment as % of firm equity (0.021)
Other investors’ expected governance research 0.0784∗∗∗
× High investment as % of fund family equity holdings (0.015)
Other investors’ expected governance −0.0872∗∗∗
research × Market adj. return (0.020)

Other investors’ expected governance −0.1407∗∗∗
research × Profitability (0.048)
Controls Yes Yes Yes Yes Yes
Fixed effects Industry, Industry, Industry, Industry, Industry,
year, year, year, year, year,
investor investor investor investor investor
Adj. R -squared .232 .232 .232 .232 .232
Observations 397,165 397,165 397,165 397,165 397,165
The sample consists of an unbalanced panel of 87 mutual fund families × firms owned by each fund, between 2011 and 2017. For each investor × firm meeting, the dependent
variable is a dummy equal to one if the mutual fund family viewed the current or prior year proxy statement of the firm in the window beginning 30 days prior to the release
of the current year proxy statement and continuing through the annual meeting, and it equals zero otherwise. To calculate Other investors’ expected governance research, we first
define expected governance research for each fund family, equal to the percentage of its holdings for which it viewed the firm’s proxy statements in the similar window before
the meeting in the prior year. Second, for each fund family×firm meeting observation, we calculate the ownership-weighted expected research of all other fund families, where
weights are based on ownership for the current year, that is, the quarter-end prior to the meeting. Columns 2–5 include interactions between Other investors expected governance
research and High investment as a % of firm equity, defined as a dummy equal to one if the fund family’s investment as a fraction of firm market capitalization are in the 90th
percentile or higher (column 2); High investment as a % of fund family equity holdings, defined as a dummy equal to one if the fund family’s investment as a fraction of total fund
family equity holdings in the 90th percentile or higher (column 3); Market-adjusted returns of the firm (column 4); and Profitability of the firm (column 5). Regressions include
industry, year, and investor fixed effects, as well as all controls included in Table 4 (not tabulated). Standard errors are clustered by firm-meeting. *p < .1; **p < .05; ***p < .01.
27
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1–48
interaction between Other investors expected research and both abnormal firm
returns and firm profitability are significantly negative, indicating that investors
coordinate significantly more among more poorly performing firms.
We also considered the possibility that investors free-ride on the information
acquisition of others. This would produce a negative relation between an
investor’s research and Other investors expected research, that is, the same

relation predicted by Hellwig and Veldkamp’s information differentiation
hypothesis. The significantly positive coefficients across all specifications
provide no evidence to support either scenario. However, we acknowledge that
one limitation of our analysis stems from measurement error in Other investors
expected research. The persistence in holdings as well as the persistence in firm
characteristics means that both the dependent variable and the key independent
variable may be influenced by some underlying firm-level unobservable
characteristic. While the combination of the theoretical underpinning and the
significant cross-sectional patterns (as shown in columns 2–5) mitigate these
concerns, we have no way to entirely overcome them.
The observed coordination in governance research raises the question of
whether investors also time their information acquisition, relative to other
investors. To examine this, we focus on the release of ISS’s recommendation.
ISS’s recommendation, and the associated information that comes with it, can
be thought of as a representation of the votes of many investors (who follow
ISS recommendations). An investor who seeks to monitor the firm will rely on
both independent research and ISS’s information. In contrast, an investor who
is more focused on minimizing costs will more heavily rely on the information
in ISS’s release. We estimate a multinomial logit, shown in Internet Appendix
Table A6.21 The results are illustrative. Index funds concentrate their research
after the estimated release of ISS’s recommendation, consistent with them
minimizing research costs. In contrast, the greater research of investors with
larger holdings and of poorly performing firms is spread both before and after
the ISS information release, consistent with the greater monitoring incentives
in such cases.
Our finding of coordination in governance research is consistent with
investors determining that they can have a greater influence when other
investors are similarly exerting pressure on the firm, for example, through
their votes. As stated by Hellwig and Veldkamp (2009, p. 223), “Agents who
want to do what others do, want to know what others know.” However, the
combination of all investors focusing on similar firms (Tables 2–4), combined
with coordination between investors (Table 5) has a dark side: certain types
of firms are substantially less likely to be monitored by any of these entities.
The next section examines the relation between governance research and both
investors’ observed monitoring and firm outcomes.
21 The table shows relative risk ratio parameters, which reflect the percentage effect of the independent variable on
the outcome, relative to one. Further detail is provided in the table legend.
28

4. Does Governance Research Contribute to Increased Monitoring?

We posit that investors who conduct more in-depth research will be more likely
to exert their influence through both voice and exit, and Sections 5.1 and 5.2
focus on these channels. Section 5.3 examines the extent to which more intense
monitoring influences firms’ policies, for example, investment decisions and

payout decisions.
4.1 Does governance research influence investors’ voting?

The voting process represents one of the main channels through which
investors can influence firms’ governance, for example, by voting on directors,
compensation plans, and other governance factors (see, e.g., Gillan and Starks
2000; Aggarwal, Saffi, and Sturgess 2015). Mutual funds have a fiduciary
obligation to vote their shares but vary considerably in how they satisfy
this obligation. As shown by Iliev and Lowry (2015) and Malenko and
Shen (2016), many funds indiscriminately follow the recommendations of the
largest proxy advisory service company, ISS, whereas other firms are more
likely to independently assess issues up for vote. A key difference is that
ISS recommendations are based on more one-size-fits-all approaches, while
informed voters are more likely to consider firm-specific factors. Following
Iliev and Lowry, we define informed voting in terms of the likelihood that a
mutual fund comes to a different decision than ISS (see also Malenko and Shen
2016), on at least a fraction of issues. We posit that more research by an investor
will lead to more informed voting.
We focus on our sample of mutual fund investors, where we can link the
identity of the investor conducting research (viewing filings on the EDGAR
platform) to the investor voting shares. Establishing the causal effects of
research on investor monitoring is challenging, because as shown in Tables 2–4
investors conduct more research on certain types of firms (e.g., larger firms)
and within certain firm-years (e.g., more contentious items up for vote). These
factors also influence investors’ voting. To overcome this endogeneity, we use
the busy spring proxy season indicator variable. As noted earlier, approximately
75% of firms have December fiscal year ends, and these firms have their
meetings during the busy spring proxy season. This measure is relatively
constant over time for any firm, as firms tend to have their meetings at the
same time every year. This suggests that the timing of firm meetings will be
exogenous to the contentiousness of items up for vote.
Further analyses support the conclusion that the timing of firm meetings is
exogenous to the items up for vote. First, as noted earlier, our sample excludes
special meetings, which firms have more ability to time. Second, we find little
evidence that companies purposefully move their annual meetings into or out
of the busy period. Across our entire sample, we identify only 3.2% of cases
in which a firm moved their meeting by more than 1 month relative to the
prior year (but did not move their fiscal year end). Third, results are robust to
29

excluding this relatively small number of firms that moved their meetings and
also to excluding firms that recently went public, who may have more recently
set the meeting date conditional on an expectation of what would be on the
agenda.22 In sum, the busy proxy season is not directly related to the items up
for vote, and it provides an exogenous shock to the attention an investor can
pay to any one shareholder meeting (as shown in Tables 2 and 4).23

Our measures of governance research include both an indicator variable
for whether a mutual fund family viewed any firm proxy statements prior to
the annual meeting and a continuous measure based on the number of firm
proxy statements viewed. In the first-stage regression (not tabulated), we regress
research on the busy meeting indicator, plus all controls. F-tests from these
first-stage regressions all exceed 100.
Table 6 shows second-stage regressions, where we regress our informed
voting measure on instrumented governance research. Because research is at
the firm meeting × fund family level, we measure informed voting as the
percentage of fund votes (across agenda items voted by a mutual fund family in
a firm meeting) that differ from ISS’s recommendations. We restrict the sample
to the unbalanced panel of 87 mutual fund families × firms in which each family
holds shares in the quarter before the meeting date. We include independent
variables used in previous regressions, plus industry, year, and investor fixed
effects. Thus, we are capturing variation within each investor’s portfolio.24
Columns 1 and 2 show that using either measure of governance research,
more research significantly increases the probability of informed voting,
consistent with predictions. Subsequent columns compare effects among Say-
on-Pay proposals, which are a direct vote on the Board’s ability to set optimal
compensation (columns 3 and 4), with director proposals (columns 5 and 6).
Fisch, Palia and Solomon (2018) conclude that Say-on-Pay proposals are often
considered a referendum on the CEO’s performance, and Cotter, Palmiter,
and Thomas (2013) find that low levels of Say-on-Pay support lead to a
shift in management-shareholder relations. Consistent with investors focusing
their attention on proposals that prior literature concludes can be particularly
impactful, we find that effects are concentrated within the Say-on-Pay sample.
The finding that more research causes investors to engage with firms more
actively, as proxied by informed voting, suggests that these investors also have
22 Specifically, we exclude firms that have been publicly traded for less than 5 years. We reestimate results in
Tables 6–10 after excluding firms that either moved their annual meetings or that have been publicly traded for
less than 5 years.
23 To ensure that the lower average research of firm meetings during the busy period is not driven by these meetings
being less contentious, we compare meetings during busy and nonbusy periods. As shown in Internet Appendix
Table A8, results show no evidence in support of this possibility.
24 Our instrumental approach estimates the effect of research on marginal cases, which are sufficiently controversial
to receive attention if time allows but which tend to get bypassed during busier periods. Thus, as with any
instrumental variables approach, economic magnitudes reflect a local average treatment effect (LATE) rather
than an average treatment effect (ATE). We focus most of our discussion on the sign of the coefficients and the
statistical significance.
30

Table 6
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

Causal effect of research on informed voting
Dep’t variable = % votes that differ from ISS’s recommendation
(across agenda items voted by fund family in firm meeting)
All proposals Say-on-pay proposals Director proposals
View proxy 10.698∗∗ 30.505∗ 4.078
indicator (4.555) (17.403) (7.409)
ln(1 + Proxy views) 7.978∗∗ 22.733∗ 3.040

(3.396) (12.915) (5.523)
Control variables Yes Yes Yes Yes Yes Yes
Fixed effects Investor, Investor, Investor, Investor, Investor, Investor,
Industry, Industry, Industry, Industry, Industry, Industry,
year year year year year year
First-stage F-test 142.6 143.9 141.1 139.9 144.4 146.0
Observations 319,680 319,680 285,531 285,531 319,221 319,221
This table shows instrumental variables regressions, at the firm meeting × mutual fund family level. The first stage for columns 1, 3, and 5, (not tabulated here) is similar to that in
column 3 of Table 4, where the dependent variable is View proxy indicator, equal to one if the firm viewed the firm’s proxy statement over the window beginning 30 days prior
to the release of the current year proxy statement and continuing through the annual meeting, and zero otherwise. The first stage for columns 2, 4, and 6 (not tabulated here) is
similar to that in column 1 of Table 4, where the dependent variable is Proxy views, the log of one plus views of the company’s current and prior years’ proxy statements, over the
same window. For all first-stage regressions, the instrument is the Busy week indicator, and this is omitted from the second-stage regressions. The dependent variable in the second-
stage regressions (columns 1–6) is the percentage of agenda items in the firm meeting on which the mutual fund family’s vote differs from ISS’s recommendation. The sample
consists of all management and shareholder proposals (columns 1 and 2), Say-on-Pay proposals (columns 3 and 4), and director proposals (columns 5 and 6). Regressions include all
controls in the Table 4 regressions, and all specifications include investor, industry, and year fixed effects. Standard errors are clustered by firm-meeting. *p < .1; **p < .05; ***p < .01.
31
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1–48
a greater probability of uncovering problems at the firm. This generates the

prediction that higher levels of research increase the likelihood that investors
vote against management. Panel A of Table 7 focuses on firm × investor level
regressions, where we link a fund family’s research to that family’s likelihood of
voting with management. Panel B shows firm-level regressions, where we relate
firm-level measures of research to overall vote support. In each panel, columns

1 and 2 include all management proposals. Because management supports
all these proposals, against votes represent pressure against management.25
Columns 3–4 and 5–6 focus on Say-on-Pay proposals and director proposals,
respectively.
The specifications in panel A of Table 7 are similar to those in Table 6.
Independent variables of interest are the same indicator and continuous
measures of research; the sample consists of fund family × firm meeting
observations; and we estimate instrumental variables regressions where
identification comes from the timing of the firm’s annual meeting. The
dependent variable is the percentage of proposals on which the fund family
votes with management, within a firm meeting.
Firm-level regressions in panel B similarly employ two definitions of
governance research, to capture both the incidence and the magnitude of
research. Our first measure is the number of mutual fund investors conducting
research prior to a firm meeting. Our second measure is the log of one plus all
proxy views on the EDGAR platform.
Table 7 provides strong evidence that more intensive governance research
causes lower vote support, consistent with more intense monitoring of
management. Looking first at panel A, one sees that more research leads to
lower support for management in all specifications, with significance again
concentrated in the Say-on-Pay proposals. Firm-level regressions in panel B
offer even stronger evidence, with the coefficient on research being statistically
negative in all cases. Again, the effect is particularly large for Say-on-pay
proposals. In economic terms, the reduction in Say-on-Pay support implied
by one-standard-deviation increase in mutual funds conducting research is
3.2 percentage points. This is relative to average Say-on-Pay support of
approximately 91%. In comparison, the analogous effect for director elections
is a lower 1.3 percentage-point drop.26
4.2 Does governance research influence investors’ portfolio decisions?

Prior literature has shown that threat of exit can be a powerful governance
strategy, particularly if voice fails (see, e.g., Parrino, Sias, and Starks 2003;
Admati and Pfleiderer 2009; Edmans 2009; Edmans and Manso 2011;
25 We exclude shareholder proposals because they include a mixture of cases that management also supports, cases
that management opposes but many shareholders support, and cases with little support by anybody.
26 The analogous effects for aggregate governance research (shown in columns 4 and 6) are a 1.5-percentage-point
drop for say on pay, compared to a 0.6-percentage-point drop for director elections.
32

Table 7
Causal effects of research on monitoring via voice
A. Investor × Firm-meeting-level regressions
Dep’t variable = % votes that are consistent with management’s recommendation
(across agenda items voted by fund family in firm meeting)
All management proposals Say-on-pay proposals Director proposals
View proxy indicator −7.461 −44.573∗∗ −3.266
[08:44 27/11/2021 RFS-OP-REVF210004.tex]

(6.422) (21.130) (7.013)
ln(1 + Proxy views) −5.565 −33.216∗∗ −2.434
(4.782) (15.657) (5.227)
Fixed effects Investor, Investor, Investor, Investor, Investor, Investor,
Industry, Industry, Industry, Industry, Industry, industry,
First-stage F-test 142.6 143.9 141.1 139.9 144.4 146.0
Observations 319,680 319,680 285,531 285,531 319,221 319,221
B. Firm-meeting-level regressions
Dep’t var = Average vote support across proposals in firm meeting
All management proposals Say-on-pay proposals Director proposals
ln(1 + #MF investors −3.008∗∗∗ −5.109∗∗ −2.172∗∗
that view the proxy) (0.856) (2.148) (1.039)
ln(1 + Aggregate −1.247∗∗∗ −2.089∗∗ −0.903∗∗
proxy views) (0.348) (0.879) (0.429)
Controls Yes Yes Yes Yes Yes Yes
Fixed effects Industry, Industry, Industry, Industry, Industry, Industry,
First-stage F-test 166.4 1,143.7 166.9 1,306.8 167.7 1,144.7
Observations 15,042 15,042 12,724 12,724 15,023 15,023
Panel A shows instrumental variables regressions, at the firm meeting × mutual fund family level. First-stage regressions (not tabulated) are similar to those in the analogous columns of
Table 6. The dependent variable in the second-stage regressions (shown here) is the percentage of agenda items in the firm meeting on which the mutual fund family’s vote is consistent with
management’s recommendation. Regressions include all controls in the Table 4 regressions, plus investor, industry, and year fixed effects, and standard errors are clustered by firm-meeting.
Panel B shows instrumental variables regressions at the firm meeting level. In first-stage regressions in columns 1, 3, and 5, we regress #MF investors that view the proxy, equal to the log of one
plus the number of mutual fund families that view the proxy, on the Busy week indicator and all other controls in Table 2, plus industry and year fixed effects. First-stage regressions in columns
2, 4, and 6 are similar but the dependent variable is Aggregate proxy views, the log of one plus total number of proxies viewed by all IP addresses. The instrument is the Busy week indicator, and
this is omitted from the second-stage regressions. The dependent variable in the second-stage regressions (shown here) equals average vote support across proposals at the firm’s annual meeting.
33
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In each panel, the sample consists of all management proposals (columns 1 and 2), Say-on-Pay proposals (columns 3 and 4), and director proposals (columns 5 and 6). Regressions include
all controls in the Table 2 regressions, plus industry and year fixed effects, and standard errors clustered at the firm meeting level are reported in parentheses. *p < .1; **p < .05; ***p < .01.
1–48
Table 8
Causal effects of research on monitoring via exit
Dep’t variable = Sell all Dep’t variable = Percentile
shares (0/1) rank change
View proxy indicator 0.232∗∗∗ −21.034∗∗∗
(0.084) (5.760)
ln(1 + Proxy views) 0.194∗∗∗ -17.573∗∗∗

(0.071) (4.864)
Controls Yes Yes Yes Yes
Fixed effects Investor, Investor, Investor, Investor,
Industry, Industry, Industry, Industry,
year year year year
First-stage F-test 148.4 120.7 148.4 120.7
Observations 341,284 341,284 341,284 341,284
This table shows instrumental variables regressions, at the firm meeting × mutual fund family level. The first
stage for columns 1 and 3 (not shown here) is similar to that in column 3 of Table 4, where the dependent variable
is View proxy indicator, equal to one if the fund family viewed the firm’s proxy statement over the window
beginning 30 days prior to the release of the current year proxy statement and continuing through the annual
meeting, and zero otherwise. The first stage for columns 2 and 4 (not shown here) is similar to that in column
1 of Table 4, where the dependent variable is Proxy views, the log of one plus views of the company’s current
and prior years’ proxy statements, over the same window. For all first-stage regressions, the instrument is the
Busy week indicator, and this is omitted from the second-stage regressions. In columns 1 and 2, the dependent
variable in the second-stage regressions (shown here) is a dummy equal to one if the mutual fund family divested
its holdings in the firm. In columns 3 and 4, the dependent variable is the change in portfolio rank of a firm,
defined as the rank holding of the firm in the mutual fund family’s portfolio in quarter t + 1 minus the analogous
rank in quarter t; this is expressed in percentile terms, where the 99th (1st) percentile represents the firm with
the largest (smallest) holdings within the fund family’s portfolio. Regressions include all controls in the Table 2
regressions, plus industry and year fixed effects. Standard errors are clustered at the firm-meeting level. *p < .1;
**p < .05; ***p < .01.
Edmans, Fang, and Zur 2013). Table 8 examines the extent to which more
governance research influences investors’ portfolio decisions. Similar to the
investor-level voting analyses, we restrict the sample to mutual fund investors,
where we can link an investor’s research to changes in its portfolio positions.
We employ two empirical measures related to exit. To capture exit in its
most extreme form, we define a dummy equal to one if the mutual fund family
divests all its holdings in the firm. We also define a continuous measure, equal
to the change in portfolio rank of a firm, defined as the rank holding of the firm
in the mutual fund family’s portfolio in the quarter after each meeting minus
the analogous rank in the quarter before the meeting. Within each mutual fund
family, we calculate the percentile of each portfolio stock such that the 99th
(1st) percentile represents the firm with the largest (smallest) holdings. To the
extent that higher levels of governance research increase the probability of
uncovering problems at the company, more research should have a positive
causal effect on the probability of divestment and a negative effect on change
in portfolio rank.
The Table 8 regression sample is similar to that in Table 6, except we drop
the voting data requirement and eliminate fund families where the percentage
of total equity holdings in index funds exceeds 50%. We employ the same
two measures of governance research, an indicator variable, and a continuous
measure. Columns 1 and 2 examine the likelihood that the mutual fund family
divests its entire position in the firm, and columns 3 and 4 focus on changes
34

in the firm’s percentile rank within the family’s portfolio. Results across all
specifications support predictions. More research increases the probability of
exit, measured by either divestment or change in portfolio rank.27
4.3 Effects of research on management and firm investment policies

Results to this point show that companies are more heavily researched if
there are more concerns regarding their governance, as proxied, for example,
by shareholder proposals or the presence of an activist investor. Moreover,
more intense research has a positive causal effect on monitoring, via both
voice and exit. Together, these findings suggest that governance research will
affect choices made by underlying companies. Following prior literature on
shareholder activism, Table 9 focuses on investment decisions, and Table 10
focuses on payout decisions.
As discussed by Jensen (1986), empire building is one of the principal agency
problems. Managers are motivated to increase firm size, for reasons related to
compensation, prestige, and power; such factors can incentivize managers to
take negative net present value projects. In addition, risk aversion and the desire
for a safety net can lead managers to hoard cash. Consistent with the presence
of such incentives, prior literature shows that various forms of activism are
associated with decreasing investments and/or increasing payouts. For example,
Klein and Zur (2009) find that non-hedge-fund shareholder activists decrease
firms’ capital expenditures, Nini, Smith, and Sufi (2012) and Becher, Griffin,
and Nini (2020) find lenders limit firms’ acquisitions via covenants, and Brav
et al. (2008) find that hedge fund activists increase firms’ payouts.
Table 9 examines three measures of investment. Panel A examines capital
expenditures as a fraction of assets, where capital expenditures are measured as
of the following fiscal year end, which typically occurs about 7.5 months after
the meeting. Panel B looks at the number of mergers and the value of mergers,
measured over the 365 days following the meeting. We focus on acquisitions
of $5 million or more, and market capitalization is measured at the fiscal year
end prior to the meeting. In the number of mergers regression, we also control
for the number of mergers over the past three years. We employ the same two
measures of governance research as used in the firm-level regressions in panel
B of Table 7: the number of mutual funds conducting research, and aggregate
proxies viewed across all investors.
Results provide strong evidence that more attention to the firm by investors,
in the form of governance-related research, leads firms to curtail investments.
Looking first at panel A of Table 9, one sees that a one-standard-deviation
increase in aggregate governance research causes a 14.8% decrease in capital
expenditures. In panel B, a one-standard-deviation increase in aggregate
27 Gargano and Rossi (2018) examine the effects of investor attention in the investment setting. Using brokerage
data, they conclude that paying attention is profitable for individual investors.
35

Table 9
Causal effects of governance research on firm investments
A. Capital expenditures/assets
Dep’t variable = Capital expenditures/assets
ln(1 + #MF investors that view the proxy) −0.022∗∗∗
(0.006)
ln(1 + Aggregate proxy views) −0.009∗∗∗

(0.003)
Controls Yes Yes
Fixed effects Industry, Industry,
year year
First-stage F-test 163.3 1,107.9
Observations 14,550 14,550
B. Mergers count and value

Dep’t variable = Dep’t variable =
Number of mergers following Value of mergers following
year year/firm market capitalization
ln(1 + #MF investors that view the −0.203∗∗ −0.053∗∗
proxy) (0.102) (0.023)
ln(1 + aggregate proxy views) −0.085∗∗ −0.022∗∗
(0.042) (0.009)
Fixed effects Industry, Industry, Industry, Industry,
year year year year
First-stage F-test 171.2 1,160.1 169.2 1,153.7
Observations 15,113 15,113 15,113 15,113
This table shows instrumental variables regressions at the firm meeting level. In first-stage regressions in column
1 of panel A and in columns 1 and 3 of panel B (not shown), we regress #MF investors that view proxy, equal
to the log of one plus the number of mutual funds that view the proxy, on the Busy week indicator and all other
controls in Table 2, plus industry and year fixed effects. First-stage regressions in column 2 of panel A and
columns 2 and 4 of panel B are similar, but the dependent variable is Aggregate proxy views, the log of one plus
total proxies viewed by all IP addresses. The instrument is the Busy week indicator, and this is omitted from
the second-stage regressions. The dependent variable in the second-stage regressions (shown here) in panel A
equals capital expenditures as a fraction of assets. In panel B, the dependent variable is the number of mergers
and acquisitions announced by the firm in the subsequent year in columns 1 and 2, and the value of mergers and
acquisitions announced by the firm in the subsequent year as a fraction of firm market capitalization in columns
3 and 4. Regressions include all controls in the Table 2 regressions, plus industry and year fixed effects. Columns
1 and 2 of panel B additionally control for the number of mergers over the prior three years. Standard errors are
clustered at the firm-meeting level. *p < .1; **p < .05; ***p < .01.
research causes 0.085 fewer acquisitions per year.28 When considered relative
to the mean of 0.292 acquisitions per firm-year this represents a 19.7% decrease.
Columns 3 and 4 show similar inferences when we measure mergers in dollars.
Table 10 shows that governance research also causes an increase in payouts.
Panel A looks at total payouts, and panel B looks specifically at dividends and
repurchases. Each measure is expressed as a fraction of assets. Across all three
measures, the coefficient on governance research is positive and significant at
the 1% or 5% level.29 While Brav et al. (2008) show that hedge fund activism
28 Economic significance is calculated as the coefficient on research (= −0.0849) times the standard deviation of
research (= 0.6794), which equals −0.0576. Relative to the mean number of mergers within the sample of 0.2925,
this represents a 19.72% decrease [= 100∗(−0.0849∗0.6794)/0.2925].
29 We find no evidence that governance attention has a causal effect on either CEO or board turnover (not tabulated).
This potentially reflects the fact that our results capture attention across a broad group of investors, who can
36

Table 10
Causal effects of governance research on firm payout policy
A. Total payout
Dep’t variable =
Total payout / assets
ln(1 + #MF investors that view the proxy) 0.036∗∗∗
(0.011)

ln(1 + Aggregate proxy views) 0.015∗∗∗
(0.005)
Controls Yes Yes
Fixed effects Industry, Industry,
year year
First-stage F-test 163.2 1,105.0
Observations 14,570 14,570
B. Components of payout
Dep’t variable = Dep’t variable =
Dividends/assets Repurchases/assets
ln(1 + #MF investors that view the 0.020∗∗∗ 0.018∗∗
proxy) (0.006) (0.008)
ln(1 + Aggregate proxy views) 0.008∗∗∗ 0.007∗∗
(0.002) (0.003)
Fixed effects Industry, Industry, Industry, Industry,
year year year year
First-stage F-test 163.2 1,105.0 163.2 1,105.0
Observations 14,570 14,570 14,570 14,570
This table shows instrumental variables regressions at the firm meeting level. In first-stage regressions in column
1 of panel A and in columns 1 and 3 of panel B (not shown), we regress #MF investors that view the proxy,
equal to the log of one plus the number of mutual funds that view the proxy, on the Busy week indicator and all
other controls in Table 2, plus industry and year fixed effects. First-stage regressions in column 2 of panel A and
columns 2 and 4 of panel B are similar, but the dependent variable is Aggregate proxy views, the log of one plus
total proxies viewed by all IP addresses. The instrument is the Busy week indicator, and this is omitted from the
second-stage regressions. The dependent variable in the second-stage regressions (shown here) in panel A equals
the total payout as a fraction of assets. In panel B, the dependent variable is dividends as a fraction of assets in
columns 1 and 2, and repurchases as a fraction of assets in columns 3 and 4. Regressions include all controls in
the Table 2 regressions, plus industry and year fixed effects. Standard errors are clustered at the firm-meeting
level. *p < .1; **p < .05; ***p < .01.
leads to an increase in payouts in targeted firms, our results highlight that

pressure by a more disperse group by shareholders can have similar effects.
In sum, our results highlight the extent to which pressure by a broad group
of investors causes firms to preemptively undertake value-increasing changes.
Investors’ time devoted toward researching firms, as proxied by views of the
SEC-mandated proxy statements on the EDGAR platform, entails obvious
costs. The benefits of this research represent a greater likelihood of uncovering
problems at the firm, which in turn leads to management implementing
shareholder-friendly changes to investment and payout policy.
influence management via voice and exit, but who have more limited power when management is not receptive
to change. More activist-oriented investors are likely to come in when weaker forms of pressure fail to achieve
change, and such investors likely have a greater ability to force turnover in the executive suite and the boardroom.
37

5. Discussion
The findings to this point can be interpreted as reassuring: investor monitoring,
in the form of governance-related research by a broad set of investors, influences
companies’ investments and payout policies in tangible ways. However, the
finding that investors focus their attention on a subset of firms means that

our findings also can be interpreted in a negative light. If some firms are
relatively ignored by investors, they will not obtain the same benefits as their
more researched counterparts. The effects of being ignored are summarized by
the reaction of a CEO of a small publicly traded firm, when asked about the
possibility of going private as a way to avoid the scrutiny of public markets.
He answered that he preferred to stay public because public markets largely
ignored his company (Partnoy and Solomon 2017).
To assess the extent to which certain firms are truly ignored, we examine the
persistence in the level of attention a firm receives. Two factors suggest this
persistence will be high. First, many of the firm characteristics that are most
important, such as firm size, are relatively stable year to year. Second, Chen et
al. (2020) find a high degree of persistence in investor × firm-level financial
research.
Each firm-year, we place firms into deciles based on the amount of
governance-related research conducted across all IP addresses. For each decile-
year, we then compute the percentage of firms that fall into each decile during
the subsequent year, and we average these percentages across each year in our
time-series. Table 11 presents results. Looking first at the lower-right corner,
we see that findings indicate that a firm in the highest decile of governance
research in year t has a 74.0% probability of being in the same decile in the
following year. Even more dramatic, the probability such a firm is in one of the
top-two deciles in the next year equals 97.1%.
Arguably more concerning, from a governance perspective, is the fact that
we also observe persistence in the lower tail of governance research. Firms in
the lowest decile of governance research in year t have a 40.2% probability of
falling into the same decile in year t +1, and a 63.8% probability of falling into
one of the lowest two deciles.
Figure 4 graphs this persistence. Across each of the above-described deciles,
panel A plots views in the same year as decile formation (dashed line) and the
subsequent year (solid line). The correlation is striking: the amount of attention
a firm receives in year t is extremely informative about the associated level in
the subsequent year. In fact, the two lines nearly overlap each other.
Panel B shows the extent to which such persistence remains even after
controlling for observable determinants of research. We form deciles based
on the residual from the regression in column 1 of Table 2 of views on all
firm and meeting characteristics, plus year and industry fixed effects. We plot
abnormal views in both the year of decile formation and the subsequent year
(similar to panel A). The first observation is that there is substantial variation
38

[08:44 27/11/2021 RFS-OP-REVF210004.tex]
Table 11
Persistence of research at the firm level, a transition matrix
Year t + 1 decile
Year t
Decile 1 2 3 4 5 6 7 8 9 10 Total
1 40.2% 23.6% 15.1% 7.4% 5.6% 2.1% 1.6% 1.8% 1.5% 1.2% 100.0%
2 17.5% 24.8% 21.4% 16.5% 8.6% 5.0% 3.5% 1.4% 1.1% 0.3% 100.0%
3 8.3% 18.0% 21.3% 19.6% 12.6% 11.4% 4.7% 2.5% 0.9% 0.6% 100.0%
4 5.1% 9.9% 16.2% 19.4% 20.8% 14.0% 7.9% 3.9% 2.0% 0.7% 100.0%
5 4.8% 5.0% 9.4% 18.2% 18.9% 19.3% 13.2% 7.4% 3.3% 0.6% 100.0%
6 2.5% 3.6% 5.0% 8.8% 16.8% 23.5% 20.8% 13.9% 4.2% 1.0% 100.0%
7 1.6% 2.6% 3.2% 4.6% 8.8% 17.2% 26.5% 22.4% 10.4% 2.6% 100.0%
8 0.6% 1.0% 1.5% 2.9% 4.2% 8.4% 18.9% 31.6% 24.9% 6.0% 100.0%
9 0.1% 0.6% 0.8% 1.3% 2.4% 4.1% 6.6% 16.6% 44.3% 23.1% 100.0%
10 0.0% 0.0% 0.5% 0.4% 0.4% 1.5% 2.6% 4.6% 16.1% 74.0% 100.0%
Each year, we place all firms into deciles according to the number of views of current and next years’ proxy filings by all IP addresses on the EDGAR platform over
the over the window beginning 30 days prior to the release of the current year proxy statement and continuing through the annual meeting. For each decile-year, we
then determine the percentage of firms that fall into each of the 10 deciles in the following year. These percentages are averages across all years within our sample.
39
Page: 39
1–48
A By deciles of proxy views, views in the current year

and the subsequent year

B By deciles of abnormal proxy views, views in the current year
and the subsequent year
Figure 4
Persistence of attention across deciles of governance research
For panel A, each year, we place all firms into deciles according to the number of views of current and prior
years’ proxy filings by all IP addresses on the EDGAR platform over the window beginning 30 days prior to the
release of the current year proxy statement and continuing through the annual meeting; we determine the number
of views in each decile, in both the same year as decile formation and in the subsequent year. We repeat for each
year, and then take the average across years. We plot the average proxy views in each decile, with the dashed
line representing views in the same year as decile formation (i.e., year t ), and the solid line representing views
in the subsequent year (i.e., year t +1). Panel B plots the average abnormal proxy views in each decile. These
views are adjusted for all firm and meeting characteristics and industry fixed effects as in Model 1 of Table 2:
we regress the log of one plus views and form deciles based on the residual of this regression.
40

in governance attention to firms, even after controlling for all these factors.
The dashed line represents that firms in decile 10 receive 65% more attention
than the median firm, whereas firms in decile 1 receive 63% less attention. The
solid line represents that nearly half of this “abnormal” attention persists into
the following year. Firms in decile 10 receive 33% more attention in year
t +1, whereas firms in decile 1 receive 24% less, compared to the median

firm. These results indicate that in addition to capturing factors related to
the contentiousness of the meeting that we cannot capture, the “abnormal”
attention also reflects additional firm characteristics that cause some firms to
be persistently more ignored than other firms.
The lack of attention among these firms arguably reflects several factors.
Many of these firms represent relatively small portions of large investors’
portfolios, leading these investors to devote little time to them. At the same
time, they may be too small to warrant the fixed costs associated with an
activist campaign, that is, even though the percentage gains from improving
firm efficiency might be large, the dollar gains are insufficient. Small firms
seldom receive shareholder proposals, highlighting that even one of the cheapest
types of shareholder activism is rarely used in these firms.30 We provide direct
evidence that this lack of observable governance actions is coupled with a lack
of actual governance research.
6. Conclusion
The value of corporate governance is a matter of continual debate. Despite a
large body of academic literature on the topic, there remains a lack of consensus
on this core issue. Our paper brings both a bright side and a dark side to
this debate. On the one hand, investors devote substantial attention to certain
firms, for example, large firms with contentious items up for vote. This greater
research increases the probability of informed voting. Moreover, consistent
with the greater information increasing the probability of investors uncovering
problems at the firm, it also leads to greater pressure against management,
via both voice and exit. Firm operations are affected by this more intense
monitoring. Consistent with empire building representing a key form of agency
and with monitoring curtailing such activities, we find that greater research leads
to decreased investments and increased payouts.
However, the dark side of our evidence is that a subset of firms are largely
ignored by investors. Investors’ incentives to focus on certain firm-years,
combined with coordination between investors, means that investors largely
focus on the same subset of firms. Across other firms, management can have
a high degree of confidence that their directors will receive relatively little
scrutiny, that their Say-on-Pay plans will be less closely analyzed relative to
30 Only 1.5% of firms in the bottom quartile of firm-year observations by market value of equity have a shareholder
proposal, compared to 35% of observations in the top quartile.
41

other firms, and that they have more flexibility to pursue investments without
being subject to intense external monitoring. While the separation of ownership
and control puts downward pressure on shareholder value in all public firms,
the lower monitoring in a subset of these firms causes these agency costs to be
particularly large.
42

Appendix
Table A1
Variable descriptions
Variable Definitions
EDGAR activity variables
Proxy views The number of times any proxy statement was viewed in the window

starting 30 days prior to the posting of the current proxy statement
and ending on the date of the annual meeting (Source: EDGAR Log
Files)
Proxy-related views The number of times any proxy statement was viewed plus the number
of times any other filings were viewed, conditional on these other
filings being viewed by the same IP address on the same day(s) as a
proxy. This is calculated over the window starting 30 days prior to
the posting of the current proxy statement and ending on the date of
the annual meeting (Source: EDGAR Log Files)
Financial views The number of times any 10K or 10Q was viewed in the window
starting 30 days prior to the posting of the current proxy statement
and ending on the date of the annual meeting (Source: EDGAR Log
Files)
Aggregate research Views of designated filings by all IP addresses, accessing the EDGAR
platform
Mutual fund research Views of designated filings by 87 mutual fund families. We identify
these mutual funds using the linking table provided by Digital
Elements, as described in the text and in Internet Appendix A
Small investor research Views of designated filings by IP addresses that access the internet
through common internet service providers (ISPs) and who
download a maximum of 25 SEC filings during the calendar year,
and we tabulate total views by this set of IP addresses. Internet
Appendix A lists the set of ISPs
Other investors’ expected We first define expected governance research for each fund family,
governance research equal to the percentage of its holdings for which it viewed the firm’s
proxy statements in the approximately 80-day window preceding the
annual meeting in the prior year. Then, for each fund family × firm
meeting observation, we calculate the ownership-weighted expected
research of all other fund families, where weights are based on
ownership for the current year, that is, the quarter-end prior to the
meeting
Other investors’ expected financial We first define expected financial research for each fund family, equal
research to the percentage of its holdings for which it viewed the firm’s 10K
or 10Q statements in the approximately 80-day window preceding
the annual meeting in the prior year. Then, for each fund
family×firm meeting observation, we calculate the
ownership-weighted expected research of all other fund families,
where weights are based on ownership for the current year, that is,
the quarter-end prior to the meeting
Bloomberg research
Bloomberg research Bloomberg creates a numerical attention score each hour by comparing
the average hourly count during the previous 8 hours to all hourly
counts over the previous 30 days for a particular stock. Bloomberg
then assigns a numerical score between 0 and 4 for each day based
on the highest attention in that day. We label days when attention
spiked to above the 94th percentile (Bloomberg attention score of
either 3 or 4) as Bloomberg Intense Days. See Ben-Rephael, Da, and
Israelsen (2017) for additional detail. Our dependent variable equals
the number of Bloomberg Intense Days over the 10 days prior to the
firm’s annual meeting
Company variables
Market-adjusted returns The cumulative stock returns over the previous 12 months in excess of
the value-weighted market index (Source: CRSP)
Profitability Operating Income Before Depreciation/Total Assets (Source:
Compustat)
(Continued)
43

Table A1
Continued.
High default risk Indicator variable equal to one if the firm is above the 90th percentile
for risk of default. The risk of default is measured using the naïve
Merton’s measure (Bharath and Shumway 2008) (Source:

Compustat, CRSP)
Market value of equity Adjusted Share Price × Total Shares Outstanding at the close of the
fiscal year before a recommendation/forecast change (Source:
Compustat)
Book leverage (Long-Term Debt + Debt in Current Liability) / Total Assets (Source:
Compustat)
R&D/assets Research and Development / Total Assets (Source: Compustat)
Cash/assets Cash and Short-Term Investments / (Total Assets – Cash and
Short-Term Investments) (Source: Compustat)
Market to book Adjusted share price × total shares outstanding/(Total assets – total
liabilities) at the close of the fiscal year before a
recommendation/forecast change (Source: Compustat)
Tangibility Net property, plant, and equipment/total assets (Source: Compustat)
Company events within the past

180 days
Exempt solicitation An indicator variable equal to one if a PX14A6G or PX14A6N was
filed over the previous 180 days (Source: EDGAR)
Proxy contest An indicator variable equal to one if a DEFC14A or DEFC14C (or
equivalent preliminary version) was filed over the previous 180 days
(Source: EDGAR)
Has 13D form An indicator if a Form 13D was filed over the previous 180 days
(Source: EDGAR)
Vote on merger (DEFM14A) An indicator variable equal to one if a DEFM14A or DEFM14C (or
equivalent preliminary version) was filed over the previous 180 days
(Source: EDGAR)
Annual meeting variables

ISS recommends against (meeting The fraction of agenda items on a proxy statement that ISS
average) Recommends “Against” or “Withhold” (Source: ISS Voting
Analytics)
Number of shareholder proposals The number of shareholder proposals on a proxy statement (Source:
ISS Voting Analytics)
Revised proxy indicator An indicator variable equal to one if an amendment to the current
company proxy was filed in the EDGAR system (Source: EDGAR)
Busy week of meetings An indicator variable equal to one if the meeting is during the peak of
the proxy season, defined as between the 18th week and 24th week
of the year (Source: ISS Governance)
Ownership variables
Investment as a % of firm equity The fraction of the company’s equity that a fund family owns (Source:
Thompson Reuters S34/WRDS)
Investment as % of fund family The mutual fund family’s equity holdings in a firm, divided by the total
equity holdings equity holdings of the mutual fund family (Source: Thompson
Reuters S34/WRDS)
Fund family total equity holdings Mutual fund family equity assets under management as reported on
form 13F, measures the family total equity holdings (Source:
Thompson Reuters S34/WRDS)
Fraction index funds The aggregate total net assets of all index equity mutual funds in a fund
family divided by the aggregate total net assets of all equity-focused
mutual funds in the same family (Source: CRSP Mutual Fund
Database)
Indexer An indicator variable is equal to one if the fraction of total net assets
held by index funds in a firm family is greater than 50% (Source:
CRSP Mutual Fund Database)
(Continued)
44

Table A1
Continued.
Percentile rank change Within each mutual fund family, we calculate the percentile rank of
each portfolio stock based on the value held as a percentage of fund
family total equity holdings, where the 99th (1st) percentile
represents the firm with the largest (smallest) holdings. We calculate

the change in this portfolio rank, as the rank in the quarter just after
the annual meeting minus the analogous rank in the quarter
preceding the annual meeting
Sell all shares Equal to one if the mutual fund family sells all of shares in a company,
between the quarter end preceding the annual meeting and the
quarter end after the annual meeting
Voting variables
Percentage votes that differ from For each mutual fund family × firm meeting observation, we calculate
ISS’s recommendation the percentage of agenda items on which the mutual fund family’s
votes differed from ISS’s recommendation
Percentage votes that differ from For each mutual fund family × firm meeting observation, we calculate
management’s recommendation the percentage of management proposals on which the mutual fund
family’s votes differed from management’s recommendation
Average vote support For each firm meeting observation, the average overall support rate
across all management proposals
Post-meeting firm outcome variables

Capital expenditures/assets Capital expenditures as reported at the end of year t , as a fraction of
assets at the end of year t −1
# mergers following year Number of mergers (of $5 million or more) over the 365 days following
the annual meeting
Value of mergers/market The dollar value of mergers (of $5 million or more) over the 365 days
capitalization following the annual meeting, as a fraction of market capitalization
measured at the fiscal year end prior to the meeting
Total payout/assets Dividends plus repurchases over the 365 days following the meeting, as
a fraction of assets at the fiscal year end prior to the meeting
Dividends/assets Dividends over the 365 days following the meeting, as a fraction of
assets at the fiscal year end prior to the meeting
Repurchases/assets Repurchases over the 365 days following the meeting, as a fraction of
assets at the fiscal year end prior to the meeting
45

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48

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Iliev, Peter; Kalodimos, Jonathan; Lowry, Michelle
01 Mareeswaran M Page 24
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Investors’ Attention to Corporate

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The Review of Financial Studies 00 (2021) 1–48

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intensity.2 Second, by isolating the source of research, we can measure and

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For comparison purposes, we construct measures of “Financial research”

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in many specifications, to control for variation across investors in EDGAR

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2. Patterns in Investors’ Governance Research

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A Views of proxy filings in aggregate B Views of proxy-related filings in aggregate

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Mutual funds (87 families) 85.16 163.94 17 45 104

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% cases in which fund family Average number

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meeting, 4% of firm-year observations have a proxy contest filing, 17% have a

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view) or many more views (5.5% of firms receive attention by 10 or more

3. Determinants of Governance-Related Research by Investors

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A By the firm’s market capitalization B By the firm’s rank in investor’s portfolio

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3.1 Effects of firm characteristics on investors’ governance research

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(0.021) (0.036) (0.037) (0.027) (0.045) (0.071)

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Revised proxy 0.2794∗∗∗ 0.2146∗∗∗ 0.1625∗∗∗ 0.1029∗∗∗ 0.1351∗∗∗ 0.0485∗∗∗

research, and a one-standard-deviation increase in the number of shareholder

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Market to book 0.08% 0.13% 0.03% 0.04% 0.08% 0.18%

coefficients on the governance factors are statistically significant in explaining

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3.2 Effects of investor characteristics on governance research

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Exempt solicitation 0.0206∗∗∗ 0.0246∗∗∗ 0.0125∗∗∗ 0.0345∗∗∗

and 2 regressions include many zeros. Independent variables include measures

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