When Shareholders Disagree: Trading After Shareholder Meetings

This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Using data on daily trades we find that mutual funds reduce their holdings if their votes are opposed to the voting outcome. Trading volume is high even when stock prices do not change, peaks at the meeting date, and remains high up to four weeks after shareholder meetings. These findings are difficult to reconcile with models in which shareholders trade because of differences in information. We explore recently-published models of trading based on differences of opinion, which offer sharp predictions on the relationships between volume, volatility, and the autocorrelations of volume. We find strong support for these models in the data, and little to support for models in which voting aggregates information. We conclude that shareholders disagree when they vote at meetings. Hence, trading after-meetings creates a shareholder base with more homogeneous beliefs. We argue that these findings have important implications for corporate governance.