Download This PaperSay Pays! Shareholder Voice and Firm Performance
ECGI - Finance Working Paper No. 373
Upjohn Institute Working Paper No. 13-192
49 Pages Posted: 28 Mar 2013 Last revised: 24 Jul 2013
There are 3 versions of this paper
Say Pays! Shareholder Voice and Firm Performance
Say Pays! Shareholder Voice and Firm Performance
Say Pays! Shareholder Voice and Firm Performance
Date Written: February 27, 2013
Abstract
This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder “voice” by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4.6%) and to improvements in long-term performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP operates as a regular vote of confidence, increasing efficiency and market value.
Keywords: Say-on-Pay, Shareholder Voice, Executive Compensation, Firm Performance, Governance
JEL Classification: G34, L20, M12
Suggested Citation: Suggested Citation
European Corporate Governance Institute (ECGI)
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
European Corporate Governance Institute (ECGI)
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
Maria Guadalupe (Contact Author)
INSEAD - Economics and Political Sciences ( email )
Boulevard de Constance
F-77305 Fontainebleau Cedex
France
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany