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Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge

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  • Bo Becker
  • Daniel Bergstresser
  • Guhan Subramanian

Abstract

We use the Business Roundtable’s challenge to the SEC’s 2010 proxy access rule as a natural experiment to measure the value of shareholder proxy access. We find that firms that would have been most vulnerable to proxy access, as measured by institutional ownership and activist institutional ownership in particular, lost value on October 4, 2010, when the SEC unexpectedly announced that it would delay implementation of the Rule in response to the Business Roundtable challenge. We also examine intra-day returns and find that the value loss occurred just after the SEC’s announcement on October 4. We find similar results on July 22, 2011, when the D.C. Circuit ruled in favor of the Business Roundtable. These findings are consistent with the view that financial markets placed a positive value on shareholder access, as implemented in the SEC’s 2010 Rule.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17797.

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Date of creation: Feb 2012
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Publication status: published as Bo Becker & Daniel Bergstresser & Guhan Subramanian, 2013. "Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable’s Challenge," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 127 - 160.
Handle: RePEc:nbr:nberwo:17797

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  1. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
  2. Alon Brav & Wei Jiang & Frank Partnoy & Randall Thomas, 2008. "Hedge Fund Activism, Corporate Governance, and Firm Performance," Journal of Finance, American Finance Association, American Finance Association, vol. 63(4), pages 1729-1775, 08.
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Cited by:
  1. Lucian A. Bebchuk & Alma Cohen & Charles C.Y. Wang, 2011. "Staggered Boards and the Wealth of Shareholders: Evidence from Two Natural Experiments," NBER Working Papers 17127, National Bureau of Economic Research, Inc.
  2. Cohen, Alma & Wang, Charles C.Y., 2013. "How do staggered boards affect shareholder value? Evidence from a natural experiment," Journal of Financial Economics, Elsevier, Elsevier, vol. 110(3), pages 627-641.

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