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Anticipating Loss from Proxy Contests

39 Pages Posted: 24 Feb 2017 Last revised: 30 Nov 2017

Jian Huang

Towson University - College of Business and Economics

Bharat A. Jain

Towson University

Gokhan Torna

SUNY at Stony Brook University - College of Business

Date Written: February 22, 2017

Abstract

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

Huang, Jian and Jain, Bharat A. and Torna, Gokhan, Anticipating Loss from Proxy Contests (February 22, 2017). Journal of Business Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2922048 or http://dx.doi.org/10.2139/ssrn.2922048

Jian Huang

Towson University - College of Business and Economics ( email )

8000 York Road
Towson, MD 21252
United States
410-704-3547 (Phone)
410-704-3454 (Fax)

Bharat Jain

Towson University ( email )

8000 York Road
Towson, MD 21252
United States
410-704-3542 (Phone)

Gokhan Torna (Contact Author)

SUNY at Stony Brook University - College of Business ( email )

250 Harriman Hall
Stony Brook, NY 11777
United States
631-632-5304 (Phone)
631-632-9412 (Fax)

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