Vote Avoidance and Shareholder Voting in Mergers and Acquisitions

Review of Financial Studies, Vol. 31, Issue 8, pp. 3176-3211, 2018

European Corporate Governance Institute (ECGI) - Finance Working Paper No. 481/2016

81 Pages Posted: 1 Jul 2016 Last revised: 23 Oct 2019

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR); European Corporate Governance Institute (ECGI); Canadian Sustainable Finance Network (CSFN)

Tingting Liu

Iowa State University

J. (Julie) Wu

University of Nebraska - Lincoln

Date Written: January 6, 2018

Abstract

We examine whether, how, and why acquirer shareholder voting matters. We show that acquirers with low institutional ownership, high deal risk, and high agency costs are more likely to bypass shareholder voting. Such acquirers have lower announcement returns and make higher offers than those who do not. To avoid a shareholder vote, acquirers increase equity issuance and cut payout to raise the portion of cash in mixed-payment deals. Employing a regression discontinuity design, we show a positive causal effect of shareholder voting concentrated among acquirers with higher institutional ownership. We conclude that shareholder voting mitigates agency problems in corporate acquisitions.

Keywords: vote avoidance; shareholder voting; mergers and acquisitions; acquirer announcement returns; regression discontinuity design; agency problems; offer premium; institutional monitoring

JEL Classification: G32; G34; G38

Suggested Citation

Li, Kai and Liu, Tingting and Wu, J. (Julie), Vote Avoidance and Shareholder Voting in Mergers and Acquisitions (January 6, 2018). Review of Financial Studies, Vol. 31, Issue 8, pp. 3176-3211, 2018, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 481/2016, Available at SSRN: https://ssrn.com/abstract=2801580 or http://dx.doi.org/10.2139/ssrn.2801580

Kai Li

University of British Columbia (UBC) - Sauder School of Business ( email )

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Asian Bureau of Finance and Economic Research (ABFER) ( email )

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China Academy of Financial Research (CAFR)

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European Corporate Governance Institute (ECGI) ( email )

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Canadian Sustainable Finance Network (CSFN) ( email )

Queens University
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Canada

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Tingting Liu (Contact Author)

Iowa State University ( email )

2330 Gerdin Business Building
Ames, IA 50011
United States

J. (Julie) Wu

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588
United States

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