Investors’ Perceptions of Activism via Voting: Evidence from Contentious Shareholder Meetings

Posted: 16 Jun 2021

See all articles by Francois Brochet

Francois Brochet

Boston University - Department of Accounting

Fabrizio Ferri

University of Miami - Miami Business School; European Corporate Governance Institute

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 7, 2021

Abstract

Motivated by the increasing influence of shareholder votes on corporate policies, we examine investors’ perceptions of activism via voting. To identify instances of activism via voting, we focus on annual meetings with at least one ballot item where a substantial fraction of shareholders is expected to vote against management’s voting recommendation, indicating an increase in their monitoring activity. We define such meetings as “contentious.” Using a sample of almost 28,000 meetings between 2003 and 2012, we examine stock returns over the period between the proxy filing and the annual meeting. This period captures when investors learn about the contentious nature of the upcoming meeting and form expectations about its likely impact on firms’ policies. We find that abnormal stock returns prior to contentious meetings are significantly positive and higher than those prior to non-contentious meetings. These higher abnormal returns increase with the contentiousness of the meeting; are more pronounced in firms with poor past performance, which are more likely to respond to shareholder pressure; and persist after controlling for firm-specific news and proxies for risk factors. Our results are consistent with investors’ expecting activism via voting to have a positive impact on firm value, on average, and cast doubts on regulatory attempts to restrict the use of shareholder votes.

Keywords: shareholder votes, shareholder activism, disclosures, annual meetings, corporate governance

Suggested Citation

Brochet, Francois and Ferri, Fabrizio and Miller, Gregory S., Investors’ Perceptions of Activism via Voting: Evidence from Contentious Shareholder Meetings (June 7, 2021). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3863202

Francois Brochet

Boston University - Department of Accounting ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Fabrizio Ferri (Contact Author)

University of Miami - Miami Business School ( email )

Coral Gables, FL 33146-6531
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Gregory S. Miller

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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