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Say Pays! Shareholder Voice and Firm Performance

Author

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  • Vicente Cuñat
  • Mireia Giné
  • Maria Guadalupe

Abstract

This article estimates the effects of Say-on-Pay (SoP), a policy that increases shareholder "voice" by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (5%) and to improvements in long-term profitability. In contrast, it has limited effects on pay levels and structure. Taken together our results suggest that SoP can be seen as a repeated regular vote of confidence on the CEO and that it serves as a disciplining device.

Suggested Citation

  • Vicente Cuñat & Mireia Giné & Maria Guadalupe, 2016. "Say Pays! Shareholder Voice and Firm Performance," Review of Finance, European Finance Association, vol. 20(5), pages 1799-1834.
    • Handle: RePEc:oup:revfin:v:20:y:2016:i:5:p:1799-1834.
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    File URL: http://hdl.handle.net/10.1093/rof/rfv056
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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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