Thirty Years of Shareholder Rights and Firm Valuation

61 Pages Posted: 4 Jun 2009 Last revised: 13 Jan 2015

Martijn Cremers

University of Notre Dame

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: July 2013

Abstract

This paper introduces a new hand-collected dataset tracking restrictions on shareholder rights at approximately 1,000 firms over 1978-1989. In conjunction with the 1990-2006 IRRC data, we track firms’ shareholder rights over thirty years. Most governance changes occurred during the 1980s. We find a robustly negative association between restrictions on shareholder rights (using the G-Index as a proxy) and Tobin’s Q. The negative association only appears after the judicial approval of antitakeover defenses in the 1985 landmark Delaware Supreme Court decision of Moran v. Household. This decision was an unanticipated, exogenous shock that increased the importance of shareholder rights.

Keywords: shareholder rights, antitakeover defenses, firm valuation, poison pill

JEL Classification: G34, G38

Suggested Citation

Cremers, Martijn and Ferrell, Allen, Thirty Years of Shareholder Rights and Firm Valuation (July 2013). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1413133 or http://dx.doi.org/10.2139/ssrn.1413133

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Allen Ferrell

Harvard Law School ( email )

Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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