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Large Shareholders, Shareholder Proposals, and Firm Performance: Evidence from J apan
Author(s) -
Yeh Tsungming
Publication year - 2014
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/corg.12052
Subject(s) - shareholder , accounting , business , corporate governance , shareholder resolution , empirical evidence , monetary economics , economics , finance , philosophy , epistemology
Manuscript Type Empirical Research Question/Issue Previous studies, primarily based on evidence from the U nited S tates, fail to link shareholder activism to firm performance, with one explanatory factor being that the legal and regulatory system in the U nited S tates limits the anti‐director rights of shareholders. This study is motivated by the question of whether legally binding shareholder resolutions can pressure management to improve firm performance and to enhance firm value. Research Findings/Insights By investigating 135 publicly listed Japanese firms which received shareholder resolutions from 2004 to 2010, this study finds supportive evidence for shareholder proposals. Announcement‐associated abnormal returns are higher for firms receiving election‐related proposals by large sponsors, than those unrelated to board election. Furthermore, an improving trend begins to appear in the post‐resolution year, particularly significant for firms receiving proposals to remove board members. Theoretical/Academic Implications This study provides new evidence suggesting that large shareholder activism in C orporate J apan can perform roles that used to be played by main banks before the 1990s. It also suggests that in countries where there is no active takeover market, large shareholders can effectively discipline entrenched management through active engagement. Practitioner/Policy Implications This study offers insights to corporate managers on the importance of communicating with large shareholders and addressing their concerns.