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Cambridge Finance Workshop - John Matsusaka

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When Feb 11, 2021
from 01:00 PM to 02:00 PM
Where Online
Contact Name
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John Matsusaka

Professor of Business, Law and Political Science



This paper studies the conditions under which the proxy advice market helps and hinders corporate governance. A key assumption is that investors are heterogeneous, with some focusing only on returns while others also have nonpecuniary goals, such as environmental sustainability and protection of human rights. Proxy advisory firms compete for business by choosing a scale of production, price, and “slant” of advice. Heterogeneous demand creates pressure for the market to offer an array of advice, but there is a countervailing force: when demand is sufficiently large, suppliers adopt a “platform” technology and consolidate into a natural monopoly. Under conditions that seem empirically relevant, the platform monopolist slants its advice toward the preferences of investors with non-value-maximizing goals, thereby steering corporate elections away from value maximization. We characterize the conditions under which the proxy advice market succeeds and fails, discuss policy reforms that would help it succeed, and develop normative principles for assessing proxy advice when value maximization is not the sole objective of investors.

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