Do Disclosures of Performance Metrics Matter for SoP Voting?

52 Pages Posted: 21 Jan 2016 Last revised: 10 Jul 2019

See all articles by Tathagat Mukhopadhyay

Tathagat Mukhopadhyay

University of Colorado at Boulder - Department of Accounting

Lakshmanan Shivakumar

London Business School

Date Written: June 27, 2019

Abstract

This paper examines whether investors are informationally constrained before SoP votes, and investigates the relations between the disclosures of managerial performance metrics made in proxy filings and subsequent Say-on-Pay (SoP) voting outcomes. Consistent with the explanation that investors face informational constraints, we find a positive relation between a firm’s optimally chosen level of compensation disclosure and its SoP voting outcome. We also find a positive relation between increased disclosure of compensation-related information following shocks to disclosure costs, and subsequent voting outcomes. The observed informational constraints are best explained as arising from the difficulties that boards of directors have in revealing all of the relevant compensation information without incurring substantial costs. Our findings are less supportive of the explanation that informational constraints are caused by boards seeking to obfuscate information as a means of concealing managerial rent-seeking. Our conclusions are robust to methodological controls for potential endogeneity concerns.

Keywords: Say-on-Pay, executive compensation, key performance indicators, textual disclosures

JEL Classification: G30, M12, M41

Suggested Citation

Mukhopadhyay, Tathagat and Shivakumar, Lakshmanan, Do Disclosures of Performance Metrics Matter for SoP Voting? (June 27, 2019). Available at SSRN: https://ssrn.com/abstract=2718438 or http://dx.doi.org/10.2139/ssrn.2718438

Tathagat Mukhopadhyay

University of Colorado at Boulder - Department of Accounting ( email )

419 UCB
Boulder, CO 80309-0419
United States

HOME PAGE: http://https://www.colorado.edu/business/tathagat-mukhopadhyay

Lakshmanan Shivakumar (Contact Author)

London Business School ( email )

Regent's Park
London, NW1 4SA
United Kingdom
+44 20 7000 8115 (Phone)
+44 20 7000 8101 (Fax)

HOME PAGE: http://faculty.london.edu/lshivakumar/

Register to save articles to
your library

Register

Paper statistics

Downloads
243
Abstract Views
1,507
rank
124,083
PlumX Metrics