Open AccessProxy fights as agency discipline
Author(s) -
Jian Huang,
Gökhan Torna,
Daniel E. Singer
Publication year - 2016
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv13i4p6
Subject(s) - proxy (statistics) , shareholder , fiduciary , business , corporate governance , accounting , agency (philosophy) , economics , finance , political science , law , sociology , social science , machine learning , computer science , duty
This paper investigates how proxy fights function to discipline corporate boards of directors to function as agents of the shareholders. One hundred and ninety six proxy fights are investigated between 1988 and 2009 to examine those factors which determine the most closely associated with winning or losing a proxy fight. Dissidents are found to be most likely to initiate and win a proxy fight when cumulative excess shareholder returns are negative. It is concluded that while declines in shareholder wealth do stimulate proxy fights, a semi-strong efficient market interpretation of financial performance leaves ample room for the successful defense of managerial policies and actions. Proxy fights provide an opportunity for dissidents to challenge these policies and actions often enough for proxy fights to be an effective mechanism for compelling fiduciary behavior by corporate boards.