New research out of the Fox School of Business is aimed at holding companies more accountable with annual meetings where they release earnings reports to clients and shareholders.
Fox School of Business finance professor Yuanzhi Li and New York University finance professor David Yermack collaborated on a research project that studied the relationship between a company’s performance and the location of the company’s annual general meeting.
Li and Yermack’s study analyzes how and where these annual meetings are held. Primarily, the duo wanted to test its hypothesis that if companies want to avoid conflict or will be presenting embarrassing information, they push the meetings further away from the company’s headquarters.
In this way, shareholders may be less likely to attend the meeting to avoid extended traveling and the company could avoid difficult questions from clients. Factors considered in the study were the distance from major airports.
Companies that choose to move annual meetings report a six-month stock performance that is approximately 3-12 percent below their competitors.
“My co-author David Yermack specialized in corporate governance, which is my major field,” Li said. “We always wanted to write a paper together on corporate documents.”
Their paper, “Evasive Shareholder Meetings,” studied approximately 20,000 annual meetings from 2006 to 2010, covering thousands of companies.
The inspiration for the study came from German economics professor Ekkehard Wenger, whom Yermack met while teaching in Germany. The professor’s job was to attend all of the annual meetings in Germany, and in doing so was able to predict the locations of the meetings.
Also known as shareholders meetings, public companies in the U.S. are required by law to hold annual general meetings each year, which often deliver crucial information like reports on earnings and the rest of the company’s operations. Companies are also required by the Securities and Exchange Commission to post their annual reports online.
“We can’t watch tens of thousands of meetings but we can measure the locations they use,” Li said.
According to the Wall Street Journal, companies like General Electric Co. and Verizon Communications Inc. are notorious for switching their annual meeting locations to different places throughout the country each year. Several companies have a variety of reasons as to why they switch their annual meeting location, including an aim to increase percentage of shareholder participation in multiple areas.
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