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Say Pays! Shareholder Voice and Firm PerformanceVicente CuñatLondon School of Economics & Political Science (LSE) - Financial Markets Group Mireia GineThe University of Pennsylvania; IESE Business School of the University of Navarra Maria GuadalupeINSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA) February 27, 2013 ECGI - Finance Working Paper No. 373 Upjohn Institute Working Paper No. 13-192 IESE Business School Working Paper No. 02/2013 Abstract: This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder “voice” by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4.6%) and to improvements in long-term performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP operates as a regular vote of confidence, increasing efficiency and market value.
Number of Pages in PDF File: 49 Keywords: Say-on-Pay, Shareholder Voice, Executive Compensation, Firm Performance, Governance JEL Classification: G34, L20, M12 Date posted: March 28, 2013 ; Last revised: November 3, 2014Suggested CitationContact Information
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