Over-voting

When a share is lent, the lending institution often neglects to match the loan to a particular underlying share. The institution will then solicit the owner of the lent share for votes on corporate proposals, despite the owner's loss of voting rights. This “over-voting” introduces a pro-management bias for amendments requiring approval from a majority of shares outstanding. I develop an identification strategy to estimate the frequency of over-voting and find that it accounts for approximately four percent of votes cast. Additionally, company meetings most susceptible to over-voting bias have risk-adjusted returns that are decreasing with the portion of shares on loan