Abstract

http://ssrn.com/abstract=1555961
 
 

References (25)



 


 



The Vote is Cast: The Effect of Corporate Governance on Shareholder Value


Vicente Cuñat


London School of Economics & Political Science (LSE) - Financial Markets Group; Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Universitat Pompeu Fabra - Research Centre in Financial Economics and Accounting (CREFC)

Mireia Gine


The University of Pennsylvania; IESE Business School of the University of Navarra

Maria Guadalupe


INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

February 17, 2010


Abstract:     
This paper investigates whether improvements in the firm's internal corporate governance create value for shareholders. We analyze the market reaction to governance proposals that pass or fail by a small margin of votes in annual meetings. This provides a clean causal estimate that deals with the endogeneity of internal governance rules. We find that passing a proposal leads to significant positive abnormal returns. Adopting one governance proposal increases shareholder value by 2.8%. The market reaction is larger in firms with more antitakeover provisions, higher institutional ownership, stronger investor activism, and for proposals sponsored by institutions. In addition, we find that acquisitions and capital expenditures decline and long-term performance improves.

Number of Pages in PDF File: 50

Keywords: Agency Cost, Corporate Governance, Shareholder Meetings, Regression Discontinuity, Event Studies

JEL Classification: G34, D21, G14

working papers series


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Date posted: February 23, 2010 ; Last revised: February 24, 2012

Suggested Citation

Cuñat, Vicente and Gine, Mireia and Guadalupe, Maria, The Vote is Cast: The Effect of Corporate Governance on Shareholder Value (February 17, 2010). Available at SSRN: http://ssrn.com/abstract=1555961 or http://dx.doi.org/10.2139/ssrn.1555961

Contact Information

Vicente Cuñat Martinez
London School of Economics & Political Science (LSE) - Financial Markets Group ( email )
Houghton Street
London WC2A 2AE
United Kingdom
HOME PAGE: http://www.vicentecunat.com
Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )
Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 2578 (Phone)
HOME PAGE: http://www.vicentecunat.com
Universitat Pompeu Fabra - Research Centre in Financial Economics and Accounting (CREFC)
Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
HOME PAGE: http://www.vicentecunat.com
Mireia Gine
The University of Pennsylvania ( email )
Philadelphia, PA 19104
United States
215.8982743 (Phone)
IESE Business School of the University of Navarra ( email )
Avenida Pearson 21
Barcelona, 08034
Spain
Maria Guadalupe (Contact Author)
INSEAD - Economics and Political Sciences ( email )
Boulevard de Constance
F-77305 Fontainebleau Cedex
France
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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