How Do Shareholder Proposals Create Value?
74 Pages Posted: 9 Apr 2013 Last revised: 16 Apr 2017
Date Written: March 1, 2017
Shareholder votes may create value because they force boards to implement proposals’ content or because they signal shareholders’ discontent. In order to distinguish these hypotheses, we collect data on the implementation of shareholder proposals. We show that the decision to implement proposals and the launch of vote-no campaigns are triggered by separate majority thresholds. Using a regression discontinuity design, we find that there is a positive stock market reaction to majority votes when the result triggers further vote-no campaigns. In contrast, we do not detect any effect of a majority vote when it only pushes managers to implement a proposal.
Keywords: Shareholder Activism, CEO Turnovers, Director Elections, Shareholder Proposals, Shareholder Organizations
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