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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

Ali C. Akyol

University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Wei Fen Lim

University of Melbourne

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: June 7, 2010

Abstract

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

Akyol, Ali C. and Lim, Wei Fen and Verwijmeren, Patrick, Shareholders in the Boardroom: Wealth Effects of the SEC’s Rule to Facilitate Director Nominations (June 7, 2010). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1526081 or http://dx.doi.org/10.2139/ssrn.1526081

Ali C. Akyol (Contact Author)

University of Melbourne - Department of Finance ( email )

198 Berkeley Street
Faculty of Economics and Commerce
Carlton VIC 3010, Victoria 3010
Australia
+61 (3) 8344-5318 (Phone)
+61 (3) 8344-6914 (Fax)

HOME PAGE: http://www.aliakyol.com

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Wei Fen Lim

University of Melbourne ( email )

185 Pelham Street, Carlton, Victoria 3053
Melbourne, Victoria 3010
Australia

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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