Shareholders in the Boardroom: Wealth Effects of the SEC’s Rule to Facilitate Director Nominations
50 Pages Posted: 22 Dec 2009 Last revised: 30 Jun 2011
Date Written: June 7, 2010
Current attempts to reform financial markets presume that shareholder empowerment benefits shareholders. We investigate the wealth effects associated with the SEC’s rule to facilitate director nominations by shareholders. Our results are not in line with shareholder empowerment creating value: the average daily abnormal returns surrounding events that increase (decrease) the probability of passage of the proposal are significantly negative (positive). Furthermore, given an increase in the probability of passage of the proposal, firms whose shareholders are more likely to use the rule to nominate directors experience more negative abnormal returns.
Keywords: Director nominations, shareholder empowerment, proxy access, board effectiveness
JEL Classification: G34, G38
Suggested Citation: Suggested Citation