When do proxy advisors improve corporate decisions?

There is an ongoing debate about how proxy advisory firms affect corporate decisions. A major concern is that shareholders seeking to save costs use a proxy advisor's vote recommendation as substitute for own research, thereby reducing efficiency of shareholder decision-making. We show that the opposite effect -- complementarity between a proxy advisor's recommendation and shareholders' research efforts -- occurs if two conditions are met: (i) the board of directors is sufficiently well informed; and (ii) shareholders can condition their investment in research on the proxy advisor's recommendation. Then, a proxy advisor with information quality sufficiently close to that of the board strictly improves corporate decisions, while a proxy advisor with a more diverging information quality leaves corporate decisions unaffected