Proactive Investor Outreach: Evidence from Proxy Fights and Board Interlocks

54 Pages Posted: 2 Jan 2025 Last revised: 29 Dec 2024

See all articles by Eunjee Kim

Eunjee Kim

Texas A&M University - Mays Business School

Mani Sethuraman

Cornell University - Department of Accounting; Cornell SC Johnson College of Business

Shuran Zhang

Hong Kong Polytechnic University

Date Written: December 23, 2024

Abstract

This paper examines whether firms increase investor relations (IR) activities when their directors experience proxy fights at other firms. Using proxy fights at a target firm as a laboratory, we find that interlocked firms that share directors with the target firm increase IR activities following proxy fights, compared to control firms without such board connections. The effect is greater when the target firm loses the proxy fight. Moreover, the effect is stronger for interlocked firms that are held more by long-term institutional investors, have fewer anti-takeover provisions to combat activism, or exhibit lower pre-existing levels of IR activities. The increase in IR activities at interlocked firms does not increase the information delivered to shareholders but reduces the likelihood of proxy fights at these firms. Overall, our findings suggest that firms proactively reassess the importance of IR in ensuring long-term shareholder relationships and adjust their IR efforts to prevent shareholder activism.

Keywords: investor relations; investor outreach; directors; shareholder engagement; proxy contests; board interlocks; staggered difference-in-differences

JEL Classification: M41

Suggested Citation

Kim, Eunjee and Sethuraman, Mani and Zhang, Shuran, Proactive Investor Outreach: Evidence from Proxy Fights and Board Interlocks (December 23, 2024). Available at SSRN: https://ssrn.com/abstract=4375277 or http://dx.doi.org/10.2139/ssrn.4375277

Eunjee Kim (Contact Author)

Texas A&M University - Mays Business School ( email )

4113 TAMU
Wehner 449K
College Station, TX 77843-4218
United States

Mani Sethuraman

Cornell University - Department of Accounting ( email )

Ithaca, NY 14853
United States

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14853
United States

Shuran Zhang

Hong Kong Polytechnic University ( email )

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