Abstract
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.
Original language | English |
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Pages (from-to) | 167-188 |
Number of pages | 22 |
Journal | Journal of Corporate Finance |
Volume | 17 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2011 |