Abstract

http://ssrn.com/abstract=1984606
 


 



A Theory of Shareholder Approval and Proposal Rights


John G. Matsusaka


University of Southern California - Marshall School of Business; USC Gould School of Law

Oguzhan Ozbas


University of Southern California - Marshall School of Business - Finance and Business Economics Department

March 2016

AFA 2013 San Diego Meetings Paper
USC CLEO Research Paper Series No. C12-1
Marshall School of Business Working Paper No. FBE 02-12
USC Law Legal Studies Paper No. 12-3

Abstract:     
This paper develops a theory to study how giving shareholders the right to approve and propose policies or directors affects firm value. The model highlights the distinction between the right to approve and the right to propose. The right to approve is weak; the right to propose is impactful but can help as well as hurt shareholders. Managers have an incentive to deter proposals from activist shareholders by adjusting corporate policy; one might conjecture that external pressure leads them to choose policies more appealing to other shareholders in order to reduce the electoral prospects of activist proposals. However, we show that when deterrence occurs, it is always by moving policy toward the position favored by the activist, even if this reduces shareholder wealth. Our analysis stresses the central role of voting uncertainty in determining the value consequences of shareholder rights and proxy access.

Number of Pages in PDF File: 35

Keywords: Shareholder Proposals, Director Nominations, Proxy Access, Right to Propose and Approve, Cost of Shareholder Rights


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Date posted: January 14, 2012 ; Last revised: March 29, 2016

Suggested Citation

Matsusaka, John G. and Ozbas, Oguzhan, A Theory of Shareholder Approval and Proposal Rights (March 2016). AFA 2013 San Diego Meetings Paper; USC CLEO Research Paper Series No. C12-1; USC Law Legal Studies Paper No. 12-3; Marshall School of Business Working Paper No. FBE 02-12 . Available at SSRN: http://ssrn.com/abstract=1984606 or http://dx.doi.org/10.2139/ssrn.1984606

Contact Information

John G. Matsusaka
University of Southern California - Marshall School of Business ( email )
Department of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6495 (Phone)
213-740-6650 (Fax)

USC Gould School of Law
699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-6495 (Phone)

Oguzhan Ozbas (Contact Author)
University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
213-740-0781 (Phone)
213-740-6650 (Fax)
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