Thursday, October 7, 2010

It's alive!

Those things don't happen often (at least not as often as I hoped!), but here is the link to my latest paper. It is joint work with Reena Aggarwal and Jason Sturgess (from Georgetown University)

To those of you interested in knowing a bit more about my research, this is it. Any comments are highly welcome!

Does Proxy Voting Affect the Supply and/or Demand for Securities Lending? 

We use a comprehensive proprietary data set consisting of shares available to lend (supply), shares borrowed (demand), and loan fee to study the securities lending market in the United States. We provide a better understanding of the securities lending market; examine the role of institutional investors in the voting process by analyzing the supply of lendable shares around the time of a proxy vote; and to address some of the issues related to empty voting we examine the changes in borrowing demand around the time of a proxy vote. On average, 19.57 percent of a firm’s market capitalization is available for lending, 3.3 percent is actually borrowed, and the annualized loan fee is 42 basis points. During our sample period, 2005-2009, there are 105,143 proxy agenda items. At the time of a proxy vote, there is a significant reduction in the supply of shares available to lend because institutions restrict or recall their loaned shares prior to a vote. The reduction in the supply of lendable shares is most pronounced in cases associated with significant events such as mergers, and with agenda items for which ISS recommends voting AGAINST the proposal. Our findings are consistent with institutional investors responsibly recalling shares, hence reducing supply ahead of material proposals. Most of the increase in loan fee around the time of a vote is associated with the reduction in supply which is related to the desire of institutions to vote their shares. We find statistically significant evidence of increase in demand however this increase in demand is economically small relative to the reduction in supply. In contrast, we find that the large increase in loan fee around the time of the ex-dividend date is driven by an increase in borrowing demand for cash flow reasons, with no change in the supply of lendable shares.

1 comment:

  1. as often as they're supposed to be. recognize the power of the bobol. :)

    on a more serious note, if i could help, i'd gladly do it. but you'd probably wouldn't agree on me saying the graphs need helvetica font-type or a pantone color scheme. :)