Agency versus Hold-up: Shareholder Rights and Shareholder Value

62 Pages Posted: 26 Mar 2011 Last revised: 12 Oct 2021

See all articles by Alexander F. Wagner

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Christoph Wenk

University of Zurich - Department of Banking and Finance

Date Written: October 6, 2021

Abstract

A set of policy experiments regarding binding votes on compensation in Switzerland sheds new light on the argument that shareholders may prefer to have limits on their own power. The empirical evidence suggests a trade-off: On the one hand, binding votes on compensation amounts enhance alignment of management interests with shareholders. On the other hand, when shareholders can (partially) set pay levels ex post, this may distort ex ante managerial incentives for extra-contractual, firm-specific investments. Thus, increased shareholder power reduces agency costs, but accentuates hold-up problems. These findings inform the design of policy.

Keywords: say-on-pay, event study, corporate governance, executive compensation

JEL Classification: G38, G34

Suggested Citation

Wagner, Alexander F. and Wenk, Christoph, Agency versus Hold-up: Shareholder Rights and Shareholder Value (October 6, 2021). Swiss Finance Institute Research Paper No. 11-12, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 500/2017, Available at SSRN: https://ssrn.com/abstract=1793089 or http://dx.doi.org/10.2139/ssrn.1793089

Alexander F. Wagner (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

Christoph Wenk

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,025
Abstract Views
7,812
rank
31,088
PlumX Metrics