Working Paper: CEPR ID: DP10506
Authors: Marco Becht; Andrea Polo; Stefano Rossi
Abstract: Previous studies of voting on acquisitions are inconclusive because shareholder approval in the United States is discretionary for management. We study the U.K. where approval is mandatory for deals that exceed a multivariate relative size threshold. We find that in the U.K. shareholders gain 8 cents per dollar at announcement with mandatory voting, or $13.6 billion over 1992-2010 in aggregate; without voting U.K. shareholders lost $3 billion. U.S. shareholders lost $214 billion in matched deals. Differences-in-differences and regression discontinuity analyses support a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.
Keywords: Corporate Acquisitions; Corporate Governance; Shareholder Voting
JEL Codes: G34; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Mandatory shareholder voting (G34) | Acquirer shareholder returns (G34) |
| Class 1 transactions (F38) | Acquirer shareholder returns (G34) |
| Class 2 transactions (L14) | Acquirer shareholder returns (G34) |
| Mandatory shareholder voting (G34) | Limits on offer prices (D44) |
| Mandatory shareholder voting (G34) | Number of deals that proceed (L14) |
| Multiple bidders (D44) | Positive effect of mandatory voting (K16) |