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Essays on Visual Communication and Corporate Shareholder Engagement

Li, Z. (2025). Essays on Visual Communication and Corporate Shareholder Engagement. (Unpublished Doctoral thesis, City St George’s, University of London)

Abstract

This thesis empirically examines the impact of corporate visual communication strategies and of corporate shareholder engagement on key market participants. Corporate shareholder engagement involves a dialogue between managers and shareholders through meetings, roundtables, and shareholder surveys. In this thesis, I focus on the impact of direct communication between shareholders and the firm – corporate shareholder engagement – on (i) analyst assessment of a firm’s prospects and (ii) on institutional investors’ holdings. Additionally, I integrate insights from the psychology literature to investigate whether mood images (information-free graphical elements) included in an annual report influence shareholders’ vote on the say-on-pay (SOP) proposals.

The thesis is based on three chapters. The first chapter examines whether mood images (information-free graphical elements) included in an annual report influence shareholder votes on the say-on-pay (SOP) proposals. We find that, on average, mood images promote heuristic decision-making and enhance shareholder voting support for the SOP proposal. However, when shareholders face cognitive dissonance due to the presence of signals that conflict with the managers’ pay proposal, they evaluate the SOP proposal more critically. This, in turn, negates the positive effect that mood images have on shareholder SOP support. Our findings reveal the contingent nature of the effect of mood images on shareholder voting behavior consistent with the cognitive dissonance theory.

The second chapter examines if direct communication between a firm and shareholders to exchange information and solicit shareholder views – corporate shareholder engagement – affects analyst assessment of a firm’s prospects. As a quasi-natural experiment that increases a firm’s shareholder engagement activities, we use Institutional Shareholder Services (ISS) investigation of corporate engagement activities. We find an increase in earnings forecast optimism for firms subject to ISS investigation and a reduced likelihood an analyst will terminate coverage of such firms. However, forecast accuracy decreases for these firms, which suggests actual earnings do not match up to more optimistic analyst views. The results are present only for firms subject to ISS investigation for the first time. Overall, the findings suggest that analysts consider firm corporate shareholder engagement to have a positive effect on firm performance. However, analysts overweight the impact of corporate engagement on earnings resulting in inaccurate earnings forecasts.

In the third chapter, we examine whether direct communication between a firm and shareholders to exchange information and solicit shareholder views – corporate shareholder engagement – affect institutional ownership. We answer this question using a quasi-natural experiment that increases a firm’s shareholder engagement activities – the Institutional Shareholder Services (ISS) investigation of a firm’s corporate engagement activities. We document that a positive shock to corporate shareholder engagement has a positive effect on institutional holdings. This effect is driven by changes in ownership by transient investors, who benefit from increased transparency and the ability to speak with the firm more directly. The effect is more pronounced for smaller firms, which typically have less developed forms of communicating with investors. Overall, the findings suggest that institutional investors consider firm corporate shareholder engagement in their portfolio allocation decisions.

Publication Type: Thesis (Doctoral)
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Departments: Bayes Business School > Bayes Business School Doctoral Theses
Doctoral Theses
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