Less Is More: Making Shareholder Activism A Valued Mechanism Of Corporate Governance
AbstractInstitutional investors have increasingly engaged in corporate governance activities, introducing proxy proposals and negotiating with management, with a goal of improving corporate performance. As shareholder activism has increased, financial economists have sought to measure its effect on performance. This paper reviews the corporate finance literature on institutional investors' activities in corporate governance and also empirically investigates the effect of confidential voting proposals on voting outcomes. It then uses the findings of the empirical literature to inform normative recommendations for the proxy process. In brief, there is an apparent paradox: Notwithstanding the development of shareholder activism and commentators' generally positive assessments of it, the empirical research indicates that such activism has little or no effect on targeted firms' performance. This implies that activist institutions ought to reassess their agenda, in order to use their resources more effectively. The paper takes a two-pronged approach to furthering this aim. First, it suggests a mechanism of internal control, whereby funds would engage in periodic review of their shareholder-activism programs to identify the most fruitful governance objectives. Second, it seeks to provide incentives to undertake such internal revaluations by advocating elimination or significant reduction of the subsidy of proposal sponsorshi
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm140.
Date of creation: 01 Jun 2000
Date of revision: 01 Nov 2001
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Del Guercio, Diane & Seery, Laura & Woidtke, Tracie, 2008. "Do boards pay attention when institutional investor activists "just vote no"?," Journal of Financial Economics, Elsevier, vol. 90(1), pages 84-103, October.
- Nicole Boyson & Robert Mooradian, 2011. "Corporate governance and hedge fund activism," Review of Derivatives Research, Springer, vol. 14(2), pages 169-204, July.
- Jackowicz, Krzysztof & Kowalewski, Oskar, 2012. "Crisis, internal governance mechanisms and pension fund performance: Evidence from Poland," Emerging Markets Review, Elsevier, vol. 13(4), pages 493-515.
- Lee, Dong Wook & Park, Kyung Suh, 2009. "Does institutional activism increase shareholder wealth? Evidence from spillovers on non-target companies," Journal of Corporate Finance, Elsevier, vol. 15(4), pages 488-504, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.