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Proxy Advisory Firms and Stock Option ExchangesDavid F. LarckerStanford University - Graduate School of Business Allan L. McCallStanford University - Graduate School of Business Gaizka OrmazabalUniversity of Navarra, IESE Business School April 9, 2012 Rock Center for Corporate Governance at Stanford University Working Paper No. 100 Abstract: This paper examines the relationship between firm performance and the recommendations provided by proxy advisory firms in the United States, regarding shareholder votes in stock option exchange programs. Using a comprehensive sample of stock option exchanges announced between 2004 and 2009, we find that exchange firms following the restrictive policies of proxy advisory firms exhibit statistically lower market reaction at the announcement of this transaction, lower operating performance, and higher executive turnover. These results are consistent with the conclusion that proxy advisory firm recommendations regarding stock option exchanges are not value increasing for shareholders. David Larcker is a co-author of the book Corporate Governance Matters, FT Press 2011. Prior draft date: August 19, 2011 Current Draft Date: April 9, 2012
Number of Pages in PDF File: 60 Keywords: proxy advisory firms, stock option exchanges, institutional shareholder voting, proxy voting JEL Classification: G1, G3, K2, L5 working papers seriesDate posted: April 19, 2011 ; Last revised: April 10, 2012Suggested CitationContact Information
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