Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

Marco Becht, Andrea Polo, Stefano Rossi

Series number :

Serial Number: 
422/2014

Date posted :

May 01 2014

Last revised :

June 12 2014
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Keywords

  • Corporate acquisitions • 
  • Shareholder voting • 
  • Corporate governance

Shareholder voting on corporate acquisitions is controversial. In most countries acquisition decisions are delegated to boards and shareholder approval is discretionary, which makes existing empirical studies inconclusive. We study the U.K. setting where shareholder approval is imposed exogenously via a threshold test that provides strong identification. 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. Multidimensional regression discontinuity analysis supports a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.

Published in

Published in: 
Publication Title: 
The Review of Financial Studies,
Description: 
Volume 29, Issue 11, 1 November 2016, Pages 3035–3067

Authors

Real name: 
Fellow, Research Member, Institutional Member, Board Member
Solvay Brussels School for Economics and Management, Université libre de Bruxelles
Real name: 
Research Member
Universitat Pompeu Fabra and Barcelona GSE