Who Do You Vote For? Same-Race Voting Preferences in Director Elections

Working Paper
2024 American Finance Association Conference*, 2023 Financial Management Association Conference, 2023 European Finance Association Conference, UIUC doctoral student seminar, 2023 Eastern Finance Association Conference, 2022 Australasian Finance and Banking Conference, 2022 Miami Behavioral Finance Conference*, SMU brown bag meeting*, UQ brown bag meeting, and NUS brown bag meeting

This paper examines racial preferences of shareholders in the context of corporate director elections. We document a higher propensity of mutual fund managers to vote for director nominees who match their racial or ethnic identity. This same-race preferential voting pattern is more prevalent in elections involving nominees receiving negative recommendations from the dominant proxy advisor ISS. We investigate various potential channels –statistical discrimination, value maximization, conflicts of interest, social networks, and taste-based biases– using high-dimensional fixed effect models along with heterogeneity tests. Additional evidence indicates that same-race preferential voting has important consequences for director candidates’ election and career outcomes.

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