Does Mandatory Shareholder Voting Prevent Bad Acquisitions?
Forthcoming, Review of Financial Studies
59 Pages Posted: 31 May 2014 Last revised: 29 Jun 2016
Date Written: March 15, 2016
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: Suggested Citation