The evasive shareholder meeting manoeuvre

“When companies move their annual meetings a great distance from headquarters, they tend to announce disappointing earnings results and experience pronounced stock market underperformance in the months after the meeting. Companies appear to schedule meetings in remote locations when the managers have private, adverse information about future performance and wish to discourage scrutiny by shareholders, activists, and the media. However, shareholders do not appear to decode this signal, since the disclosure of meeting locations leads to little immediate stock price reaction.”

Prof_LiProf_YermackThis previously under-researched business tactic is (un)covered in a new NBER research paper from Lily Yuanzhi Li, [left] currently Assistant Professor of Finance at the Temple University Fox School of Business, Philadelphia, and David L. Yermack, [right] who is the Albert Fingerhut Professor of Finance and Business Transformation at the Leonard Norman Stern School of Business, New York University.

But how remote is remote? The authors give an example :

“As an example of a meeting held at a remote location, TRW Automotive Holdings, an auto parts manufacturer with a market capitalization of about $4 billion, convened its May 14, 2007, annual meeting at the Renaissance Casa de Palmas Hotel in McAllen TX, at the Southern tip of the continental United States near the Mexican border. The meeting took place almost 1,400 miles from the company’s headquarters outside Detroit, and more than 300 miles from the nearest major airport, Houston.”

And there are even more far flung instances :

“One company, General Cable Corp., has a Kentucky headquarters but held its annual meetings in Spain, Costa Rica, and Germany at different times during our sample period.”

The full paper can be read here : Evasive shareholder meetings (NBER Working Paper No. 19991, issued in March 2014)