Discussion of LiYermack Evasive Shareholder Meetings Rotterdam June

Discussion of Li-Yermack: Evasive Shareholder Meetings Rotterdam, June 2014 Moqi Xu, LSE 1

The paper • Firms move shareholder meetings to avoid shareholder scrutiny • “Evasive meeting locations” predict negative returns • Suggestive evidence on contested votes and time of the meeting • Do active shareholders add value? • This result suggests that they at least foster timely disclosure of negative news 2

Location • Exceptional location changes are the most convincing measure: I recommend starting from here and documenting exceptional locations – Headquarters are logistically easy for firms but investors may prefer resorts, NYC hotels, or a place close to their home – Resorts may reflect wasteful behaviour (or the financial ability to host lavish meetings – trying to signal financial health? ) – Do distance measures explain returns over and above “exceptionality”? • Current distance measures in miles do not necessarily reflect ease of attendance – Alternative measures could involve travel time (stata command: traveltime) – for example for its largest investors – or sponsors of shareholder proposals 3

Time • Current results on meeting times have potential for expansion • Weekends are probably more harmful to attendance than meetings that start at 8 am (especially in remote locations where investors have to arrive one night before anyway) • Many other potentially low-attendance days: before bank holidays, major sport events, school holidays • Consistent measures across all tables? 4

Mechanism • Managers have adverse private information and avoid probing questions by activist shareholders – Are HQ-based shareholders the most active participants in meetings (protocols)? – Do remote locations indeed attract fewer questions (protocols)? – What exactly is the information that is revealed later (litigation? Accounting scandals? ) • Avoidance of “theatrical protests” that may lead to unfavorable news coverage – Do remote locations indeed trigger less unfavorable news coverage? (Capital IQ ) – Do those predict permanent or only temporary return drops? – This mechanism has different implications: here it is not the shareholders that bring bad news to light. But why should local activists be not able to simply contact the news? • Manage outcome of proposals? But shareholders can proxy vote in the US More important outside the US? 5

Meetings in China • North Electro-Optic planned an AGM in Shanxi on April 23, 2014 – Announcement April 11: “We changed the AGM from Shanxi to Hubei (headquarters)” – Distance: 500 km, no major airport nearby • Ningxia Dayuan Chemicals planned an AGM in Beijing on May 16, 2014 – Announcement May 10: “We changed the AGM from Beijing to Shanghai because our headquarters changed” – The headquarters are still listed as in Ningxia (2000 km from Shanghai, 1000 from Beijing) • Xian Hongsheng Technology planned an annual meeting on June 22, 2012 – Announcement June 11: “We realized that June 22 is a public holiday and therefore postpone it to June 26” 6

Evasive meetings around the world Dependent variable = 90 day excess returns (of index) 7

Disclaimer – differences between my and the original analysis • Data (incl. returns) from Capital IQ only – very incomplete • Geolocation via findlatitudeandlongitude. com • Spherical distance via Stata sph_distance, winsorized at 1% • Returns winsorized at 1% • No Fama-French factors, simple OLS, no Fama Mac. Beth 8

Implications Firms move shareholder meetings to avoid negative disclosure: • Shareholder participation matters • Results hold even in countries with high shareholder protection, proxy voting rights etc. Very interesting paper, highly recommended reading. 9