Say Pays! Shareholder Voice and Firm Performance

Vicente Cuñat, Mireia Giné, MARIA GUADALUPE

Series number :

Serial Number:

373/2013

Date posted :

January 01 2012

Last revised :

July 31 2013

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Keywords

Say-on-Pay •
Shareholder Voice •
executive compensation •
Firm Performance •
governance

This paper 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 (4.6%) and to improvements in long-term performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP operates as a regular vote of confidence, increasing efficiency and market value.

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