Say Pays! Shareholder Voice and Firm Performance

53 Pages Posted: 25 Sep 2014

See all articles by Vicente Cuñat

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group

Mireia Gine

IESE Business School, University of Navarra ; The University of Pennsylvania

Maria Guadalupe

INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2014

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%) and to improvements in longterm 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 serves as a regular vote of confidence on the CEO, that leads to higher efficiency and market value.

Keywords: corporate governance, executive compensation, Say-on-Pay

JEL Classification: G34, M52

Suggested Citation

Cuñat, Vicente and Gine, Mireia and Guadalupe, Maria, Say Pays! Shareholder Voice and Firm Performance (September 2014). CEPR Discussion Paper No. DP10141. Available at SSRN: https://ssrn.com/abstract=2501624

Vicente Cuñat (Contact Author)

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.vicentecunat.com

Mireia Gine

IESE Business School, University of Navarra ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

The University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Maria Guadalupe

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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