Anticipating Loss from Proxy Contests
39 Pages Posted: 24 Feb 2017 Last revised: 30 Nov 2017
Date Written: February 22, 2017
We empirically investigate the impact of a proxy threat on corporate policies and find that the credibility of a proxy threat encourages incumbent managers to pursue more leveraged, more dividend paying, and less acquisitive policies. We provide the first evidence that the disciplinary effects of proxy contests are not only driven by the credibility of a proxy threat, but also transient. Incumbents reverse policy changes at the expense of outside shareholders once a credible threat of losing a proxy contest disappears.
Keywords: Proxy Contest, Credible Threat, Corporate Policies, Debt, Dividends, Acquisitions
JEL Classification: G3, G31, G34, G35
Suggested Citation: Suggested Citation