Shareholder Activism through the Proxy Process
AbstractThis paper provides evidence on the corporate governance role of shareholderinitiated proxy proposals. Previous studies debate over whether activists use proxy proposals to discipline firms or to simply advance their self-serving agendas, and whether proxy proposals are effective at all in addressing governance concerns. Using the largest sample yet examined as well as extensive controls for governance quality, we find that activists use the proxy process as a disciplinary mechanism, and as such are valuable monitoring agents. Moreover, proposal announcements in the proxy statements have positive stock price effects, and both the market and the voting shareholders respond as much to the target firm’s governance quality as to the proposal’s objective and sponsoring shareholder. We address the endogeneity of target selection and proposal success using sample selection models. We conclude that shareholder proposals have nontrivial control benefits, countering arguments that they should be restricted by the SEC.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2009-65.
Date of creation: 2009
Date of revision:
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Web page: http://center.uvt.nl
Shareholder activism; shareholder proposals; corporate governance; sample selection;
Other versions of this item:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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- Cziraki, P. & Renneboog, L.D.R. & Szilagyi, P.G., 2009.
"Shareholder Activism through Proxy Proposals: The European Perspective,"
2009-019, Tilburg University, Tilburg Law and Economic Center.
- Cziraki, P. & Renneboog, L.D.R. & Szilagyi, P.G., 2009. "Shareholder Activism through Proxy Proposals: The European Perspective," Discussion Paper 2009-44, Tilburg University, Center for Economic Research.
- 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.
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