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Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

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  • Becht, Marco
  • Rossi, Stefano
  • Polo, Andrea

Abstract

Previous studies of voting on acquisitions are inconclusive because shareholder approval in the United States is discretionary for management. We study the U.K. where approval is mandatory for deals that exceed a multivariate relative size threshold. We find that in the U.K. shareholders gain 8 cents per dollar at announcement with mandatory voting, or $13.6 billion over 1992-2010 in aggregate; without voting U.K. shareholders lost $3 billion. U.S. shareholders lost $214 billion in matched deals. Differences-in-differences and regression discontinuity analyses support a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.

Suggested Citation

  • Becht, Marco & Rossi, Stefano & Polo, Andrea, 2015. "Does Mandatory Shareholder Voting Prevent Bad Acquisitions?," CEPR Discussion Papers 10506, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10506
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    More about this item

    Keywords

    Corporate acquisitions; Shareholder voting; Corporate governance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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