The role of annual general meetings in a civil-law country: Evidence from Spain

The annual general meeting (AGM) constitutes, at least in theory, one of the main instruments to ensure good corporate governance. It also involves the release of corporate information to the financial market. We have examined the effects of the AGM on the volatility of stock returns and on the volume of shares traded. We have investigated the informative role of the AGM in the Spanish stock market during the period 2003-2009. This chapter constitutes the first investigation of the issue in a civil-law country. Extant research is scarce and limited to two common-law countries: the United States and the United Kingdom, where the AGM has been found to involve the release of relevant information to the market. Nevertheless, since the influential paper by La Porta, López de Silanes, Shleifer, and Vishny (1998), evidence reported in common-law countries cannot be automatically extrapolated to countries with a different legal tradition. As expected our results indicate that the information content of the AGM is lower in Spain than in common-law countries. In fact, no relevant information is released during the AGM in the Spanish stock market. This result is robust to company characteristics like size and the level of insider shareholders within its capital. Our findings support that the AGM plays a less significant role in ensuring good corporate governance in civil-law compared with common-law countries.