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Impact of Shareholder Proposals on the Functioning of the Market for Corporate Control
Author(s) -
ElKhatib Rwan,
Fogel Kathy,
Jandik Tomas
Publication year - 2017
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12125
Subject(s) - shareholder , control (management) , business , market for corporate control , identification (biology) , voter turnout , monetary economics , accounting , economics , finance , corporate governance , voting , politics , management , botany , biology , political science , law
Firms receiving shareholder proposals are 16% more likely to become a target of acquisition. Such companies earn approximately 7.2% lower acquisition returns compared to gains for targets with no proposals. Higher acquisition likelihood and lower target returns are primarily associated with proposals drawing a larger proportion of favorable votes, larger voter turnout, as well as with proposals submitted shortly before takeover announcements, and motivated by the removal of antitakeover provisions. Our findings suggest that shareholder proposals can assist bidders in the identification of targets or signal the willingness of target shareholders to accept bids with lower premiums.