Discussion of Li-Yermack: Evasive Shareholder Meetings Rotterdam, June 2014 Moqi Xu, LSE 1

2 The paper Firms move shareholder meetings to avoid shareholder scrutiny “Evasive meeting locations” predict negative returns Suggestive evidence on contested votes and time of the meeting Do active shareholders add value? This result suggests that they at least foster timely disclosure of negative news

3 Location Exceptional location changes are the most convincing measure: I recommend starting from here and documenting exceptional locations –Headquarters are logistically easy for firms but investors may prefer resorts, NYC hotels, or a place close to their home –Resorts may reflect wasteful behaviour (or the financial ability to host lavish meetings – trying to signal financial health?) –Do distance measures explain returns over and above “exceptionality”? Current distance measures in miles do not necessarily reflect ease of attendance –Alternative measures could involve travel time (stata command: traveltime) –for example for its largest investors –or sponsors of shareholder proposals

4 Time Current results on meeting times have potential for expansion Weekends are probably more harmful to attendance than meetings that start at 8am (especially in remote locations where investors have to arrive one night before anyway) Many other potentially low-attendance days: before bank holidays, major sport events, school holidays Consistent measures across all tables?

5 Mechanism Managers have adverse private information and avoid probing questions by activist shareholders –Are HQ-based shareholders the most active participants in meetings (protocols)? –Do remote locations indeed attract fewer questions (protocols)? –What exactly is the information that is revealed later (litigation? Accounting scandals?) Avoidance of “theatrical protests” that may lead to unfavorable news coverage –Do remote locations indeed trigger less unfavorable news coverage? (Capital IQ ) –Do those predict permanent or only temporary return drops? –This mechanism has different implications: here it is not the shareholders that bring bad news to light. But why should local activists be not able to simply contact the news? Manage outcome of proposals? But shareholders can proxy vote in the US More important outside the US?

6 Meetings in China North Electro-Optic planned an AGM in Shanxi on April 23, 2014 –Announcement April 11: “We changed the AGM from Shanxi to Hubei (headquarters)” –Distance: 500 km, no major airport nearby Ningxia Dayuan Chemicals planned an AGM in Beijing on May 16, 2014 –Announcement May 10: “We changed the AGM from Beijing to Shanghai because our headquarters changed” –The headquarters are still listed as in Ningxia (2000 km from Shanghai, 1000 from Beijing) Xian Hongsheng Technology planned an annual meeting on June 22, 2012 –Announcement June 11: “We realized that June 22 is a public holiday and therefore postpone it to June 26”

7 Evasive meetings around the world Dependent variable = 90 day excess returns (of index)

Disclaimer – differences between my and the original analysis Data (incl. returns) from Capital IQ only – very incomplete Geolocation via findlatitudeandlongitude.com Spherical distance via Stata sph_distance, winsorized at 1% Returns winsorized at 1% No Fama-French factors, simple OLS, no Fama MacBeth 8

Implications Firms move shareholder meetings to avoid negative disclosure: Shareholder participation matters Results hold even in countries with high shareholder protection, proxy voting rights etc. Very interesting paper, highly recommended reading. 9