Managerial Response to Shareholder Empowerment: Evidence from Majority Voting Legislation Changes

Managerial Response to Shareholder Empowerment: Evidence from Majority Voting Legislation Changes

Vicente Cuñat, Yiqing Lü, Hong Wu

Series number :

Serial Number: 
622/2019

Date posted :

August 08 2019

Last revised :

August 08 2019
SSRN Share

Keywords

  • Corporate governance • 
  • Majority Voting • 
  • shareholder activism • 
  • Management Fronting

This paper studies how managers react to shareholder empowerment vis-à-vis governance provisions. We show that a staggered legislative change that increases noncompliance costs in the implementation of shareholder-initiated majority voting proposals is followed by an increase in the submission of management-initiated proposals.

Management adopts provisions that crowd out shareholder-initiated proposals, pre-empt shareholder-initiated changes and give management control over future voting standard amendments. The remaining firms experience a more negative market return reaction in response to close-call votes on shareholder-initiated proposals. The results jointly indicate that managers seek to preserve shareholder-value by moderating the implementation of majority voting standards.

Authors

Real name: 
Research Member
Department of Finance, London School of Economics
Real name:
Yiqing Lü
Real name:
Hong Wu