Vote Avoidance and Shareholder Voting in Mergers and Acquisitions
Review of Financial Studies, Vol. 31, Issue 8, pp. 3176-3211, 2018
81 Pages Posted: 1 Jul 2016 Last revised: 26 Aug 2019
Date Written: January 6, 2018
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: Suggested Citation