The Empire Strikes Back: How Do Firms Counter Proxy Advisors’ Unfavorable Recommendations
Prof. Huai ZHANG, Professor of Accounting, Nanyang Business School, Nanyang Technological University, Singapore
Date: 25 September 2025 (Thursday)
Time: 14:30-16:00
Venue: E22-G004
Host: Prof. Shuangchen YU, Assistant Professor in Accounting
Abstract
Using hand-collected data, we study whether and how firms counter unfavorable recommendations made by Institutional Shareholder Services (ISS), the largest proxy advisor, to win shareholders’ support in proxy voting. 5.7% of the firms facing unfavorable ISS recommendations choose to counter ISS’s claims, and when they do so, they usually directly communicate with shareholders by issuing additional disclosures (strike-back disclosures). The stock market reacts positively to the issuance of strike-back disclosures. The disclosures are associated with high pro-management voting outcomes and the association is more pronounced when the disclosures cite factual errors and the support from other proxy advisors. ISS changes its recommendation from negative to positive in 15% of the cases when strikeback disclosures are issued, and the likelihood is higher for fact-based rebuttals. ISS seems to revise its policies in response to firms’ complaints and the frequency of complaints declines after ISS policy revisions. Our paper suggests that firms’ strike-back disclosures are deemed informative by investors and they are effective in swaying the voting outcome, ISS recommendations, and its policies. Our findings offer implications for academics, investors, proxy advisors, and securities regulators.
Speaker
Dr Huai ZHANG received his B.A. from Peking University and Ph.D. from Columbia University. He has published papers in the following Financial Times Top-50 journals: Journal of Accounting and Economics, Journal of Accounting Research, Journal of Finance, Management Science, Contemporary Accounting Research, and Review of Accounting Studies. He is devoted to mentoring young talent, and the majority of his publications are coauthored with his doctoral students. He received the Best Paper Award at the 2004 International Finance Conference and the 2016 Midwest Finance Association Meeting. He was also the recipient of Nanyang Business School Research Excellence Award in 2011, 2013 and 2019. He is the former President of CAPANA (Chinese Accounting Professors’ Association of North America), and the keynote speaker at several accounting research conferences. He is a former editor of Accounting Horizons and current editor of the International Journal of Accounting, an associate editor of Journal of Contemporary Accounting and Economics, and editorial board member of several academic journals, including Contemporary Accounting Research, Journal of Accounting and Public Policy, Journal of Business Finance & Accounting, China Accounting and Finance Review, and Review of Accounting and Finance.
All are welcome!
