Does Shareholder Voting Matter? Evidence from the Takeover Market

54 Pages Posted: 29 Sep 2016 Last revised: 17 Aug 2018

See all articles by Paul Mason

Paul Mason

Baylor University

Usha Rodrigues

University of Georgia School of Law

Mike Stegemoller

Baylor University

Steven Utke

University of Connecticut - Department of Accounting

Date Written: August 12, 2017


Voting rights are a basic shareholder-protection mechanism. Outside of the core voting requirements state law imposes (election of directors and votes on fundamental changes), federal law grants shareholders additional voting rights. But these rights introduce concomitant costs into corporate governance. Each grant of a voting right thus invites the question: is the benefit achieved worth the cost the vote imposes?

The question is not merely a theoretical one. Recently the SEC, concerned about Nasdaq’s potential weakening of shareholder voting protections, has lamented that little evidence exists on the value of the shareholder vote. This Article provides that evidence. It examines the implementation of a Nasdaq shareholder voting rule to identify the associated costs and benefits of requiring the approval of acquisitions by the acquiring firm’s shareholders. It finds firms alter the structure of their acquisitions to avoid shareholder voting. On its own, this finding could suggest self-serving behavior — managers may be avoiding shareholder votes to effectuate suboptimal transactions at the shareholders’ expense. Yet this Article finds no difference in returns to acquisitions that require a shareholder vote and those that do not. This lack of a difference suggests that, on average, for acquiring shareholders the costs outweigh the benefits associated with shareholder voting. Such results suggest that regulators and exchanges alike should be cautious when imposing shareholder voting requirements. The shareholder franchise, a relatively blunt and costly instrument, is best suited to fundamental corporate changes and director elections.

Keywords: Mergers, Acquisitions, Corporate Governance, Shareholder Voting, Shareholder Rights, Shareholder Approval, Stock Exchange Rules, Method of Payment

JEL Classification: G32, G34, G38

Suggested Citation

Mason, Paul and Rodrigues, Usha and Stegemoller, Michael A. and Utke, Steven, Does Shareholder Voting Matter? Evidence from the Takeover Market (August 12, 2017). Wake Forest Law Review, Vol. 53, No. 1, 2018, University of Georgia School of Law Legal Studies Research Paper No. 2018-26, Available at SSRN: or

Paul Mason

Baylor University ( email )

Waco, TX 76798
United States

Usha Rodrigues

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States
706-242-5562 (Phone)

Michael A. Stegemoller

Baylor University ( email )

P.O. Box 98004
Waco, TX 76798-8004
United States
254-710-4145 (Phone)

Steven Utke (Contact Author)

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States


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