Home bias in shareholder voting

Abstract

Institutional investors’ proxy voting decisions are influenced by their geographic proximity to portfolio firms. Using a sample of over 50 million votes cast by U.S. and non-U.S. investors globally, I find that investors are more likely to vote with management at domestic firms than at foreign firms, especially when ISS disagrees with management. I further demonstrate that the home bias can be explained by local investors’ information advantage and business ties with domestic firms. These results suggest that home bias is an important determinant of proxy voting behavior, and the existence of home bias is at least partially driven by rationality-based reasons.