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

33 Pages Posted: 8 Dec 2016 Last revised: 20 Jun 2018

See all articles by John G. Matsusaka

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

University of Toronto

Date Written: June 1, 2018

Abstract

This paper studies the market reaction to SEC no-action letter decisions that determine whether a shareholder proposal can be excluded from the proxy statement. We find that over the period 2007-2016, the market reacted positively when the SEC permitted exclusion. Investors appear to have been most skeptical about proposals related to corporate governance and proposals at high-profit firms, suggesting that investors believe some proposals can hurt shareholders by disrupting companies that are already performing well. The evidence is compatible with the view that managerial resistance is based on a genuine concern that proposals can harm firm value.

Suggested Citation

Matsusaka, John G. and Ozbas, Oguzhan and Yi, Irene, Can Shareholder Proposals Hurt Shareholders? Evidence from SEC No-Action Letter Decisions (June 1, 2018). 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

University of Toronto ( email )

Toronto
Canada

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