Shareholder Activism through the Proxy Process

Posted: 6 Mar 2008 Last revised: 6 May 2008

See all articles by Luc Renneboog

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Peter G. Szilagyi

EDHEC Business School

Multiple version iconThere are 3 versions of this paper

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

Suggested Citation

Renneboog, Luc and Szilagyi, Peter G., Shareholder Activism through the Proxy Process (May 2, 2008). Available at SSRN: https://ssrn.com/abstract=1102186 or http://dx.doi.org/10.2139/ssrn.1102186

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Peter G. Szilagyi (Contact Author)

EDHEC Business School ( email )

24 Av. Gustave Delory
Roubaix, 59057
France

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