Thirty Years of Shareholder Rights and Firm Valuation
University of Notre Dame
Harvard Law School; European Corporate Governance Institute (ECGI)
Journal of Finance, Forthcoming
This paper introduces a new hand-collected dataset tracking restrictions on shareholder rights at approximately 1,000 firms over 1978-1989. In conjunction with the 1990-2006 IRRC data, we track firms’ shareholder rights over thirty years. Most governance changes occurred during the 1980s. We find a robustly negative association between restrictions on shareholder rights (using the G-Index as a proxy) and Tobin’s Q. The negative association only appears after the judicial approval of antitakeover defenses in the 1985 landmark Delaware Supreme Court decision of Moran v. Household. This decision was an unanticipated, exogenous shock that increased the importance of shareholder rights.
Number of Pages in PDF File: 61
Keywords: shareholder rights, antitakeover defenses, firm valuation, poison pill
JEL Classification: G34, G38
Date posted: June 4, 2009 ; Last revised: January 13, 2015
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