Market Valuation of Anticipated Governance Changes: Evidence from Contentious Shareholder Meetings

60 Pages Posted: 5 Jul 2016 Last revised: 14 Dec 2016

See all articles by Francois Brochet

Francois Brochet

Boston University - Department of Accounting

Fabrizio Ferri

University of Miami - Miami Business School

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business

Date Written: July 1, 2016

Abstract

We define annual shareholder meetings as contentious if one or more ballot items are likely to obtain sufficient shareholder votes to induce a firm to implement governance changes. Using a sample of almost 28,000 meetings between 2003 and 2012, we find that abnormal stock returns over the 40-day period prior to contentious meetings are significantly positive and higher than prior to non-contentious meetings. These higher abnormal returns persist after controlling for firm-specific news and proxies for risk factors and are more pronounced in firms with poor past performance. Our results are consistent with investors viewing an increase in the probability of shareholder vote-induced governance changes as value creating, on average.

Keywords: Shareholder votes, shareholder activism, disclosures, annual meetings, corporate governance

JEL Classification: G34, G38, J33, M12

Suggested Citation

Brochet, Francois and Ferri, Fabrizio and Miller, Gregory S., Market Valuation of Anticipated Governance Changes: Evidence from Contentious Shareholder Meetings (July 1, 2016). Columbia Business School Research Paper No. 16-47; 27th Annual Conference on Financial Economics and Accounting Paper. Available at SSRN: https://ssrn.com/abstract=2803706 or http://dx.doi.org/10.2139/ssrn.2803706

Francois Brochet

Boston University - Department of Accounting ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Fabrizio Ferri (Contact Author)

University of Miami - Miami Business School ( email )

Coral Gables, FL 33146-6531
United States

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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