Download this Paper Open PDF in Browser

Can Shareholder Proposals Hurt Shareholders? Evidence from SEC No-Action Letter Decisions

49 Pages Posted: 8 Dec 2016 Last revised: 13 Aug 2017

John G. Matsusaka

University of Southern California - Marshall School of Business; USC Gould School of Law

Oguzhan Ozbas

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Irene Yi

Purdue University

Date Written: August 1, 2017

Abstract

This paper studies the market reaction to SEC no-action letter decisions in order to produce well-identified estimates of the value consequences of shareholder proposals. Whereas previous research is limited by an inability to identify the date when investors become aware of a proposal, our approach employs a well-defined event date at which the SEC makes an uncertain and expressly value-neutral decision to block a proposal or allow it to proceed to a vote. We find that over the period 2007-2016, the market reacted positively when the SEC permitted a proposal to be excluded from the proxy statement, suggesting that the market viewed these proposals as harmful to shareholders. Investors appear to have been most skeptical about proposals relating to corporate governance and the elements of the E-Index, and proposals targeted at high-profit firms. The evidence casts doubt on the assumption that proposal rights can only help and never hurt shareholders.

Suggested Citation

Matsusaka, John G. and Ozbas, Oguzhan and Yi, Irene, Can Shareholder Proposals Hurt Shareholders? Evidence from SEC No-Action Letter Decisions (August 1, 2017). USC CLASS Research Paper No. CLASS17-4; Marshall School of Business Working Paper No. 17-7. Available at SSRN: https://ssrn.com/abstract=2881408 or http://dx.doi.org/10.2139/ssrn.2881408

John G. Matsusaka

University of Southern California - Marshall School of Business ( email )

Department of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6495 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States
213-740-6495 (Phone)

Oguzhan Ozbas (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
213-740-0781 (Phone)
213-740-6650 (Fax)

Irene Yi

Purdue University ( email )

West Lafayette, IN
United States

Paper statistics

Downloads
292
Rank
87,082
Abstract Views
939