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Do boards pay attention when institutional investor activists "just vote no"?

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  • Del Guercio, Diane
  • Seery, Laura
  • Woidtke, Tracie

Abstract

We examine "just vote no" campaigns, a recent innovation in low-cost shareholder activist tools whereby activists encourage their fellow shareholders to withhold votes toward a director's election to express dissatisfaction with management performance or the firm's corporate governance structure. Grundfest [1993. Just vote no: a minimalist strategy for dealing with barbarians inside the gates. Stanford Law Review 45, 857-937] argues that a substantial withheld vote motivates directors to take immediate action to avoid further embarrassment. We find a variety of supportive evidence, including operating performance improvements and abnormal disciplinary chief executive officer (CEO) turnover, indicating that such campaigns induce boards to take actions in shareholders' interests. Furthermore, abnormal turnover is robust to controlling for concurrent events and firm- and CEO-specific controls.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 90 (2008)
Issue (Month): 1 (October)
Pages: 84-103

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Handle: RePEc:eee:jfinec:v:90:y:2008:i:1:p:84-103

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Web page: http://www.elsevier.com/locate/inca/505576

Related research

Keywords: Shareholder activism CEO turnover Director reputation Public pension funds Director elections;

References

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Citations

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Cited by:
  1. Larcker, David F. & McCall, Allan L. & Ormazabal, Gaizka, 2012. "The Economic Consequences of Proxy Advisor Say-on-Pay Voting Policies," Research Papers 2105, Stanford University, Graduate School of Business.
  2. Armstrong, Christopher S. & Gow, Ian D. & Larcker, David F., 2012. "The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans," Research Papers 2097, Stanford University, Graduate School of Business.
  3. Foley, Maggie & Cebula, Richard & Jun, Chulhee, 2013. "An Analysis of Withdrawn Shareholder Proposals," MPRA Paper 55422, University Library of Munich, Germany.
  4. Boylan, Robert & Cebula, Richard & Foley, Maggie & Liu, Xiaowei, 2013. "An Analysis of Omitted Shareholder Proposals," MPRA Paper 56659, University Library of Munich, Germany.
  5. Masulis, Ronald W. & Mobbs, Shawn, 2014. "Independent director incentives: Where do talented directors spend their limited time and energy?," Journal of Financial Economics, Elsevier, vol. 111(2), pages 406-429.
  6. Dhillon, Amrita & Rossetto, Silvia, 2009. "Corporate Control and Multiple Large Shareholders," The Warwick Economics Research Paper Series (TWERPS) 891, University of Warwick, Department of Economics.
  7. Hadani, Michael & Goranova, Maria & Khan, Raihan, 2011. "Institutional investors, shareholder activism, and earnings management," Journal of Business Research, Elsevier, vol. 64(12), pages 1352-1360.
  8. Bajo, Emanuele & Barbi, Massimiliano & Bigelli, Marco & Hillier, David, 2013. "The role of institutional investors in public-to-private transactions," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4327-4336.
  9. Ng, Lilian & Wang, Qinghai & Zaiats, Nataliya, 2009. "Firm performance and mutual fund voting," Journal of Banking & Finance, Elsevier, vol. 33(12), pages 2207-2217, December.
  10. Stephen G. Dimmock & William C. Gerken & Zoran Ivković & Scott J. Weisbenner, 2014. "Capital Gains Lock-In and Governance Choices," NBER Working Papers 20176, National Bureau of Economic Research, Inc.
  11. Nicole Boyson & Robert Mooradian, 2011. "Corporate governance and hedge fund activism," Review of Derivatives Research, Springer, vol. 14(2), pages 169-204, July.
  12. Ali Akyol & Konrad Raff & Patrick Verwijmeren, 2012. "The Elimination of Broker Voting in Director Elections," Tinbergen Institute Discussion Papers 12-094/IV/DSF38, Tinbergen Institute.
  13. David Yermack & Yuanzhi Li, 2014. "Evasive Shareholder Meetings," NBER Working Papers 19991, National Bureau of Economic Research, Inc.

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