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Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

59 Pages Posted: 31 May 2014 Last revised: 29 Jun 2016

Marco Becht

Solvay Brussels School of Economics and Management (ULB); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Andrea Polo

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE); Centre for Economic Policy Research (CEPR)

Stefano Rossi

Bocconi University; Krannert School of Management; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2016

Abstract

Shareholder voting on corporate acquisitions is controversial. In most countries acquisition decisions are delegated to boards and shareholder approval is discretionary, which makes existing empirical studies inconclusive. We study the U.K. setting where shareholder approval is imposed exogenously via a threshold test that provides strong identification. U.K. shareholders gain 8 cents per dollar at announcement with mandatory voting, or $13.6 billion over 1992-2010 in aggregate; without voting U.K. shareholders lost $3 billion. Multidimensional regression discontinuity analysis supports a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.

Keywords: Corporate acquisitions, shareholder voting, corporate governance

JEL Classification: G34, K22

Suggested Citation

Becht, Marco and Polo, Andrea and Rossi, Stefano, Does Mandatory Shareholder Voting Prevent Bad Acquisitions? (March 15, 2016). Forthcoming, Review of Financial Studies; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 422/2014 - forthcoming, Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=2443792 or http://dx.doi.org/10.2139/ssrn.2443792

Marco Becht (Contact Author)

Solvay Brussels School of Economics and Management (ULB) ( email )

42 Avenue F. D. Roosevelt
1050
Brussels, 1050
Belgium
+32 2 6504466 (Phone)

HOME PAGE: http://www.solvay.edu/profile/marcobecht

European Corporate Governance Institute (ECGI) ( email )

Palace of the Academies
Rue Ducale 1 Hertogstraat
Brussels, 1000
Belgium

HOME PAGE: http://www.ecgi.org/members_directory/member.php?member_id=6

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrea Polo

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Stefano Rossi

Bocconi University ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Krannert School of Management ( email )

West Lafayette, IN 47907-1310
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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