How Does the Market React When Shareholders Lose Power?

Abstract

Using a decision made by a corporate vote tabulating firm, I examine how the market views shareholder proposals and whether shareholder empowerment creates value. I find that the type of proposal and its sponsor are important factors. The results show that the market’s reaction was positive for firms with social responsibility proposals and individual investor sponsored proposals, suggesting that such proposals are not viewed as value enhancing by the market.My results suggest that it is important to understand how shareholders get involved in corporate affairs to correctly gauge the benefits and costs of shareholder empowerment.

Keywords: shareholder proposals, shareholder empowerment, governance

JEL Classification: G34