Advertisement

Service Business

, Volume 13, Issue 2, pp 419–431 | Cite as

Using voting decisions to identify shocks in the financial services industry

  • Juan Pineiro-ChousaEmail author
  • Marcos Vizcaíno-González
  • Samuel Ribeiro-Navarrete
Empirical article
  • 84 Downloads

Abstract

This paper assesses the effects of industry shocks on shareholder votes in the financial services industry. We analyze votes on managers’ proposals for executive compensation and the election of directors in NASDAQ financial companies from 2003 to 2017. Our analyses imply that shareholders’ reactions to major industry shocks are reflected in shareholder voting decisions. We report evidence of significant changes in the fundamental drivers of those decisions for four recent industry shocks: the onset of the financial crisis in 2007, the subsequent stimulus decisions by G20 countries, the European sovereign debt crisis, and the emerging markets crisis. These findings can help managers understand what drives shareholder satisfaction in the uncertain environments that follow industry shocks. This insight can help managers design successful strategies to cope with the effects of such shocks.

Keywords

Financial services Service business Shareholder votes Industry shocks Financial crisis 

References

  1. Ahern KR, Harford J (2014) The importance of industry links in merger waves. J Financ 69(2):527–576CrossRefGoogle Scholar
  2. Alissa W (2015) Boards’ response to shareholders’ dissatisfaction: the case of shareholders’ say on pay in the UK. Eur Account Rev 24(4):727–752CrossRefGoogle Scholar
  3. Bebchuk LA, Weisbach MS (2010) The state of corporate governance research. Rev Financ Stud 23(3):939–961CrossRefGoogle Scholar
  4. Bebchuk LA, Cohen A, Ferrell A (2008) What matters in corporate governance? Rev Financ Stud 22(2):783–827CrossRefGoogle Scholar
  5. Benetos E, Kotropoulos C (2010) Non-negative tensor factorization applied to music genre classification. IEEE Trans Audio Speech Lang Process 18(8):1955–1967CrossRefGoogle Scholar
  6. Berry MW, Browne M, Langville AN et al (2007) Algorithms and applications for approximate nonnegative matrix factorization. Comput Stat Data Anal 52(1):155–173CrossRefGoogle Scholar
  7. Buciu I (2008) Non-negative matrix factorization, a new tool for feature extraction: theory and applications. Int J Comput Commun Control 3:67–74CrossRefGoogle Scholar
  8. Carmona-Saez P, Pascual-Marqui RD, Tirado F et al (2006) Biclustering of gene expression data by non-smooth non-negative matrix factorization. BMC Bioinform 7:78.  https://doi.org/10.1186/1471-2105-7-78 CrossRefGoogle Scholar
  9. Chen S, Lin C (2018) Managerial ability and acquirer returns. Q Rev Econ Financ 68:171–182.  https://doi.org/10.1016/j.qref.2017.09.004 CrossRefGoogle Scholar
  10. Cichocki A, Zdunek R, Phan AH et al (2009) Nonnegative matrix and tensor factorizations: applications to exploratory multi-way data analysis and blind source separation. Wiley, ChichesterCrossRefGoogle Scholar
  11. Cruz-Ros S (2009) Multi-item models for evaluating managerial and organizational resources in service firms. Serv Bus 3(3):229–257CrossRefGoogle Scholar
  12. Cullinan CP, Mahoney L, Roush PB (2017) Are CSR activities associated with shareholder voting in director elections and say-on-pay votes? J Contemp Account Econ 13(3):225–243CrossRefGoogle Scholar
  13. Dalton DR, Hitt MA, Certo ST et al (2007) The fundamental agency problem and its mitigation: independence, equity, and the market for corporate control. Acad Manag Ann 1(1):1–64CrossRefGoogle Scholar
  14. David P, Bloom M, Hillman AJ (2007) Investor activism, managerial responsiveness, and corporate social performance. Strateg Manag J 28(1):91–100.  https://doi.org/10.1002/smj.571 CrossRefGoogle Scholar
  15. de Fréin R, Drakakis K, Rickard S (2008) Portfolio diversification using subspace factorizations. In: 42nd Annual conference on information sciences and systems, 2008, 1075–1080Google Scholar
  16. De Marchi V, Lee J, Gereffi G (2014) Globalization, recession and the internationalization of industrial districts: experiences from the Italian gold jewellery industry. Eur Plan Stud 22(4):866–884CrossRefGoogle Scholar
  17. Díaz-Foncea M, Marcuello C (2012) Social enterprises and social markets: models and new trends. Serv Bus 6(1):61–83CrossRefGoogle Scholar
  18. Digan SP, Kerrick SA, Cumberland DM et al (2017) The roles of knowledge and organizational form on opportunity evaluation. J Small Bus Strategy 27(2):65–89Google Scholar
  19. Drakakis K, Rickard S, De Fréin R et al (2008) Analysis of financial data using non-negative matrix factorization. Int Math Forum 3(38):1853–1870Google Scholar
  20. Fernández AI, González F, Suárez N (2018) Bank supply shocks and the substitution between bank and nonbank debt. J Corp Financ 48:122–147CrossRefGoogle Scholar
  21. Ferri F, Oesch D (2016) Management influence on investors: evidence from shareholder votes on the frequency of say on pay. Contemp Account Res 33(4):1337–1374CrossRefGoogle Scholar
  22. Gackowski T (2017) The idea of investor relations in the modern economy: a communication approach. Econ Res 30(1):1–13Google Scholar
  23. Galant A, Cadez S (2017) Corporate social responsibility and financial performance relationship: a review of measurement approaches. Econ Res 30(1):676–693Google Scholar
  24. Gaujoux R, Seoighe C (2010) A flexible R package for nonnegative matrix factorization. BMC Bioinform 11(1):367CrossRefGoogle Scholar
  25. Gonzalez AC, Rodriguez Y, Sossa A (2017) Leadership and governance decisions in family business performance: an application of fuzzy sets logic. J Small Bus Strategy 27(1):51–66Google Scholar
  26. Goranova M, Ryan LV (2014) Shareholder activism: a multidisciplinary review. J Manag 40(5):1230–1268Google Scholar
  27. Goranova M, Abouk R, Nystrom PC et al (2017) Corporate governance antecedents to shareholder activism: a zero-inflated process. Strateg Manag J 38(2):415–435.  https://doi.org/10.1002/smj.2472 CrossRefGoogle Scholar
  28. Grosse M, Kean S, Scott T (2017) Shareholder say on pay and CEO compensation: three strikes and the board is out. Account Financ 57(3):701–725CrossRefGoogle Scholar
  29. Hadley B (2017) Determinants of disclosures of alternative pay measures and their role in say on pay approval. Manag Financ 43(2):263–280Google Scholar
  30. Hoberg G, Phillips G (2016) Text-based network industries and endogenous product differentiation. J Polit Econ 124(5):1423–1465CrossRefGoogle Scholar
  31. Hooghiemstra R, Kuang YF, Qin B (2015) Say-on-pay votes: the role of the media. Eur Account Rev 24(4):753–778CrossRefGoogle Scholar
  32. Jenter D, Kanaan F (2015) CEO turnover and relative performance evaluation. J Financ 70(5):2155–2184CrossRefGoogle Scholar
  33. Julià JF, Chaves R (2012) Introduction: social economy, a third sector in a plural people-oriented economy. Serv Bus 6(1):1–4CrossRefGoogle Scholar
  34. Kang ESL, Lam SY (2017) Contingent effects of firm and employee reputations on professional advice adoption. Serv Bus 11(2):345–373CrossRefGoogle Scholar
  35. Krolikowski MW, Okoeguale K (2018) Economic shocks, competition and merger activity. J Bus Account Financ Perspect 1(1): In PressGoogle Scholar
  36. Le Breton-Miller I, Miller D, Bares F (2015) Governance and entrepreneurship in family firms: agency, behavioral agency and resource-based comparisons. J Fam Bus Strategy 6(1):58–62CrossRefGoogle Scholar
  37. Lee DD, Seung HS (1999) Learning the parts of objects by non-negative matrix factorization. Nature 401(6755):788–791Google Scholar
  38. Li SZ, Hou X, Zhang H et al (2001) Learning spatially localized, parts-based representation. In: Proceedings of the IEEE Conference on Computer Vision and Pattern Recognition (CVPR), December, Vol. 1, pp 207–212.  https://doi.org/10.1109/cvpr.2001.990477
  39. Liu T (2009) Non-negative matrix factorization for stock market pricing. In: Proceedings of the 2nd international conference on biomedical engineering and informatics, October, pp 1–5  https://doi.org/10.1109/bmei.2009.5304773
  40. McKee DL (2008) Services, growth poles and advanced economies. Serv Bus 2(2):99–107CrossRefGoogle Scholar
  41. Mejia-Roa E, Carmona-Saez P, Nogales R et al (2008) BioNMF: A web-based tool for nonnegative matrix factorization in biology. Nucl. Acids Res. 36 (suppl 2, Web Server issue): W523–W528  https://doi.org/10.1093/nar/gkn335
  42. Mora N (2015) Creditor recovery: the macroeconomic dependence of industry equilibrium. J Financ Stab 18(C):172–186CrossRefGoogle Scholar
  43. Morkutė G, Koster S, Van Dijk J (2017) Employment growth and inter-industry job reallocation: spatial patterns and relatedness. Reg Stud 51(6):958–971.  https://doi.org/10.1080/00343404.2016.1153800 CrossRefGoogle Scholar
  44. Nielsen FÅ, Balslev D, Hansen LK (2005) Mining the posterior cingulate: segregation between memory and pain components. Neuroimage 27(3):520–532CrossRefGoogle Scholar
  45. Obermann J (2018) Can management-sponsored non-binding remuneration votes shape the executive compensation structure? Evidence from say-on-pay votes in Germany. Eur J Financ (In Press).  https://doi.org/10.1080/1351847x.2017.1419982
  46. Obermann J, Velte P (2018) Determinants and consequences of executive compensation-related shareholder activism and say-on-pay votes: a literature review and research agenda. J Account Lit 40:116–155CrossRefGoogle Scholar
  47. Pauca VP, Shahnaz F, Berry MW et al (2004) Text mining using non-negative matrix factorizations. 2004 SIAM Int Conf Data Min 4:452–456CrossRefGoogle Scholar
  48. Petrakis PE, Valsamis DG, Kafka KI (2017) From optimal to stagnant growth: the role of institutions and culture. J Innov Knowl 2(3):97–105CrossRefGoogle Scholar
  49. Piñeiro-Chousa J, Vizcaíno-González M, Carvalho das Neves J (2017) Persistent voting decisions in shareholder meetings. Psychol Market 34:1050–1056CrossRefGoogle Scholar
  50. Piñeiro-Chousa J, López-Cabarcos MÁ, Pérez-Pico AM et al (2018) Analyzing microblogging activity and stock market behavior through artificial neural networks. J Bus Account Financ Perspect 1(1): In PressGoogle Scholar
  51. Ravina E, Sapienza P (2009) What do independent directors know? Evidence from their trading. Rev Financ Stud 23(3):962–1003CrossRefGoogle Scholar
  52. Renneboog L, Szilagyi PG (2011) The role of shareholder proposals in corporate governance. J Corp Financ 17(1):167–188CrossRefGoogle Scholar
  53. Sanchez-Marin G, Lozano-Reina G, Baixauli-Soler JS et al (2017) Say on pay effectiveness, corporate governance mechanisms, and CEO compensation alignment. Bus Res Q 20(4):226–239CrossRefGoogle Scholar
  54. Shahnaz F, Berry MW, Pauca VP et al (2006) Document clustering using nonnegative matrix factorization. Inf Process Manag 42(2):373–386CrossRefGoogle Scholar
  55. Stathopoulos K, Voulgaris G (2016) The importance of shareholder activism: the case of say-on-pay. Corp Gov 24(3):359–370CrossRefGoogle Scholar
  56. Stewart H (2015) Beware the global financial crisis, part III. The Guardian: Sep 18Google Scholar
  57. The Guardian (2011) Global financial crisis: five key stages 2007–2011. https://www.theguardian.com/business/2011/aug/07/global-financial-crisis-key-stages. Accessed 27 Mar 2018
  58. Torres P, Augusto M (2017) The impact of experiential learning on managers’ strategic competencies and decision style. J Innov Knowl 2(1):10–14CrossRefGoogle Scholar
  59. Tuan LT (2015) From clinical governance through CSR and knowledge sharing to clinical error control. Serv Bus 9(4):687–709CrossRefGoogle Scholar
  60. Vinten G (1998) Corporate governance: an international state of the art. Manag Audit J 13(7):419–431CrossRefGoogle Scholar
  61. Vizcaíno M, Chousa JP (2016) Analyzing the influence of the funds’ support on Tobin’s q using SEM and fsQCA. J Bus Res 69(6):2118–2124.  https://doi.org/10.1016/j.jbusres.2015.12.018 CrossRefGoogle Scholar
  62. Wang W (2007) Squared euclidean distance based convolutive non-negative matrix factorization with multiplicative learning rules for audio pattern separation. In: Proceedings of the IEEE International Symposium on Signal Processing and Information Technology, December, pp 347–352  https://doi.org/10.1109/isspit.2007.4458186
  63. Wang J (2015) Constrained matrix factorization for financial data clustering. Intell Data Anal 19(2):315–343CrossRefGoogle Scholar
  64. Wang DH, Yu TH, Ye F (2012) The value relevance of brand equity in the financial services industry: an empirical analysis using quantile regression. Serv Bus 6(4):459–471CrossRefGoogle Scholar
  65. Wood W (2008) Portfolio diversification using nonnegative matrix factorization. Stetson University Reseach Papers, U.SGoogle Scholar
  66. Xu W, Liu X, Gong Y (2003) Document clustering based on non-negative matrix factorization. In: Proceedings of the 26th annual international conference on research and development in information retrieval, July, pp 267–273.  https://doi.org/10.1145/860435.860485
  67. Zdunek R, Cichocki A (2006) Non-negative matrix factorization with quasi-newton optimization. In: Proceedings of the international conference on artificial intelligence and soft computing, June, pp 870–879.  https://doi.org/10.1007/11785231_9

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Juan Pineiro-Chousa
    • 1
    Email author
  • Marcos Vizcaíno-González
    • 2
  • Samuel Ribeiro-Navarrete
    • 3
  1. 1.Department of Financial Economics and Accounting, Facultad de ADEUniversidad de Santiago de CompostelaLugoSpain
  2. 2.Department of BusinessUniversidade da CoruñaA CoruñaSpain
  3. 3.University of ValenciaValenciaSpain

Personalised recommendations