Shareholder Activism through the Proxy Process
Posted: 6 Mar 2008 Last revised: 6 May 2008
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Shareholder Activism Through the Proxy Process
Shareholder Activism through the Proxy Process
Date Written: May 2, 2008
Abstract
This paper shows evidence for the corporate governance role of shareholder proposals using the largest sample yet examined. We find that claims of agenda-seeking by the sponsoring shareholders are likely to be exaggerated, because proposals are targeted at firms that both underperform and have generally poor governance structures. Moreover, proposal announcements have positive valuation effects, which match the subsequent voting outcomes in that they depend on both proposal characteristics and the target firm's governance quality. We analyze proposal success using sample selection models to control for the endogeneity of target selection. We conclude that shareholder proposals are a relevant control mechanism, countering recent arguments that they should be restricted by the SEC.
Keywords: Shareholder activism, shareholder proposals, corporate governance, sample selection
JEL Classification: G34
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