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The role of shareholder proposals in corporate governance

  • Renneboog, Luc
  • Szilagyi, Peter G.

This paper examines the corporate governance role of shareholder-initiated proxy proposals. We find that target firms tend to underperform and have generally poor governance structures, with little indication of systematic agenda-seeking by the proposal sponsors. Governance quality also affects the voting outcomes and the announcement period stock price effects, with the latter strongest for first-time submissions and during stock market peaks. Proposal implementation is largely a function of voting success but is affected by managerial entrenchment and rent-seeking. The results imply that shareholder proposals are a useful device of external control, countering arguments that they should be restricted rather than facilitated under the SEC's current regulatory agenda.

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File URL: http://www.sciencedirect.com/science/article/B6VFK-518B00D-1/2/8abc807ddd9fe1c8da71702175dc818b
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Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 17 (2011)
Issue (Month): 1 (February)
Pages: 167-188

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Handle: RePEc:eee:corfin:v:17:y:2011:i:1:p:167-188
Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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