Shareholder Activism Through the Proxy Process

45 Pages Posted: 25 Aug 2009 Last revised: 28 Jan 2011

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; Central European University

Date Written: December 15, 2009


This paper provides evidence on the corporate governance role of shareholder-initiated proxy proposals. Previous studies debate over whether activists use proxy proposals to discipline firms or to simply advance their self-serving agendas, and whether proxy proposals are effective at all in addressing governance concerns. Using the largest sample yet examined as well as extensive controls for governance quality, we find that activists use the proxy process as a disciplinary mechanism, and as such are valuable monitoring agents. Moreover, proposal announcements in the proxy statements have positive stock price effects, and both the market and the voting shareholders respond as much to the target firm’s governance quality as to the proposal’s objective and sponsoring shareholder. We address the endogeneity of target selection and proposal success using sample selection models. We conclude that shareholder proposals have nontrivial control benefits, countering 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 (December 15, 2009). TILEC Discussion Paper No. 2009-031, CentER Discussion Paper Series No. 2009-65, ECGI - Finance Working Paper No. 275/2010, Available at SSRN: or

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

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

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE

Peter G. Szilagyi

EDHEC Business School ( email )

58 rue du Port
Lille, 59046

Central European University ( email )

Nador utca 9.
Budapest, 1051
+36-1-887-5092 (Phone)
+36-1-887-5005 (Fax)


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