Abstract

http://ssrn.com/abstract=1793089
 
 

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Agency versus Hold-up: On the Impact of Binding Say-on-Pay on Shareholder Value


Alexander F. Wagner


University of Zurich - Department of Banking and Finance; Swiss Finance Institute; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Christoph Wenk


University of Zurich - Department of Banking and Finance

February 26, 2015

Swiss Finance Institute Research Paper No. 11-12

Abstract:     
Many countries are planning to introduce new or to alter existing say-on-pay laws. The general thrust of recent regulatory developments in this respect is to further strengthen shareholder power. A set of policy experiments in Switzerland sheds light on the hitherto mostly theoretical argument that shareholders may, in fact, prefer to have limits on their own power. The empirical evidence suggests a trade-off: On the one hand, binding say-on-pay provides shareholders with an enhanced ability to ensure alignment. On the other hand, when shareholders can (partially) set pay ex post, this may distort ex ante managerial incentives for extra-contractual, firm-specific investments. Thus, shareholder power reduces agency costs, but accentuates hold-up problems. These findings inform the design of policy.

Number of Pages in PDF File: 40

Keywords: Say-on-pay, event study, corporate governance, executive compensation

JEL Classification: G38, G34


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Date posted: March 26, 2011 ; Last revised: March 14, 2015

Suggested Citation

Wagner, Alexander F. and Wenk, Christoph, Agency versus Hold-up: On the Impact of Binding Say-on-Pay on Shareholder Value (February 26, 2015). Swiss Finance Institute Research Paper No. 11-12. Available at SSRN: http://ssrn.com/abstract=1793089 or http://dx.doi.org/10.2139/ssrn.1793089

Contact Information

Alexander F. Wagner (Contact Author)
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
HOME PAGE: http://www.alex-wagner.com

Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Christoph Wenk
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
Feedback to SSRN


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