Information asymmetry and say-on-pay abstention votes

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Abstract

Analyzing say-on-pay (SOP) data from 2011 to 2015 and using an initial sample of 4,393 firms and 12,644 firm-year observations, we investigate the impact of information asymmetry on SOP abstention. Drawing on agency theory and rational apathy principles, we estimate regression models and find a positive association between information asymmetry and SOP abstention. We contribute to the literature by adding additional mediation analyses. Our mediation analyses reveal that institutional ownership mediates this relationship, suggesting that higher information asymmetry leads to reduced institutional ownership, subsequently contributing to SOP abstention. However, analyst following does not exhibit a significant mediating effect. These findings illuminate the interplay between information asymmetry, shareholder behavior, and the mediating role of institutional ownership in the context of executive compensation governance. Our research highlights the significance of addressing information disparities for improved shareholder engagement and decision-making in corporate governance. Additionally, this study’s findings are relevant to academics, policymakers, and corporate stakeholders seeking to bolster corporate governance practices and strengthen shareholder participation in executive compensation matters.

Keywords: Corporate Governance, Information Asymmetry, Say-on-Pay Abstention

Authors’ individual contribution: Conceptualization — A.O.; Methodology — A.O.; Formal Analysis — A.O.; Investigation — A.O., Y.C., and A.T.; Data Curation — A.O and Y.C.; Writing — Original Draft — A.O.; Writing — Review & Editing — A.O., Y.C., and A.T.; Supervision — A.T., Y.C., and A.O.; Project Administration — A.O., Y.C., and A.T.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G32, G34, M40, M41

Received: 21.05.2024
Accepted: 31.10.2024
Published online: 05.11.2024

How to cite this paper: Omar, A., Cong, Y., & Tang, A. (2024). Information asymmetry and say-on-pay abstention votes. Corporate Governance and Sustainability Review, 8(3), 21–35. https://doi.org/10.22495/cgsrv8i3p2