Proxy Advisors and Shareholder Dissent: A Cross-Country Comparative Study

Proxy advisors are information intermediaries that enable shareholders to exercise their voting
rights. While proxy advisors’ influence is documented in market-based corporate governance
systems, we know little about the corporate governance role of proxy advice in relationshipbased
governance systems. Drawing on agency theory and the comparative corporate governance
literature, we theorize that shareholders are sensitive to the costs and benefits of
monitoring by considering internal monitoring capabilities. We also theorize that relative to
market-based corporate governance systems, proxy advice is both less influential and has lower
predictive quality in relationship-based governance systems. We test our multilevel model using
13,497 voting results from 613 firms in 16 Western European countries and generally find support
for our predictions.