Managerial Response Under Shareholder Empowerment: Evidence from Majority Voting Legislation Changes

48 Pages Posted: 6 Aug 2018

See all articles by Vicente Cuñat

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group

Yiqing Lü

New York University (NYU) - New York University (NYU), Shanghai

Hong Wu

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: July 24, 2018

Abstract

This paper studies how managers react to the empowerment of shareholders in governance provisions. A staggered legislative change that makes shareholder-initiated majority-voting proposals binding is followed by a 40% increase in the submission of management-initiated majority-voting proposals. Management adopts provisions that crowd out shareholder proposals pre-empting shareholder initiated changes and giving management control over future amendments of voting rules. The remaining firms, experience more negative market return reactions in close-call votes of shareholder proposals. This result indicates that managers resist the implementation of majority-voting standards precisely in those firms where it would be more value-destroying.

Keywords: Corporate Governance, Majority Voting, Shareholder Activism, Management Fronting

JEL Classification: G34, G14

Suggested Citation

Cuñat, Vicente and Lü, Yiqing and Wu, Hong, Managerial Response Under Shareholder Empowerment: Evidence from Majority Voting Legislation Changes (July 24, 2018). Available at SSRN: https://ssrn.com/abstract=3219188 or http://dx.doi.org/10.2139/ssrn.3219188

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.vicentecunat.com

Yiqing Lü (Contact Author)

New York University (NYU) - New York University (NYU), Shanghai ( email )

1555 Century Ave
Pudong
Shanghai, Shanghai 200122
China

HOME PAGE: http://www.yiqinglue.com/

Hong Wu

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

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