Working Paper: CEPR ID: DP13358
Authors: Nickolay Gantchev; Mariassunta Giannetti
Abstract: We show that while low-cost shareholder activism via shareholder-sponsored proposals is occasionally value-enhancing, many proposals are submitted by the same few individual investors and other sponsors without organizational capabilities to analyze a large number of firms. These proposals if approved and subsequently implemented appear to destroy shareholder value. We show that firms whose shareholders are more likely to collect information before voting benefit from low-cost shareholder activism because these investors weed out low-quality proposals. We conclude that an informed shareholder base is crucial for firms to take advantage of low-cost shareholder activism.
Keywords: shareholder activism; shareholder proposals; shareholder voting; corporate governance
JEL Codes: G3; D72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| informed shareholders (G34) | low-cost shareholder activism (G34) |
| low-cost shareholder activism (G34) | firm value (G32) |
| informed shareholders (G34) | high-quality proposals (L15) |
| uninformed or conflicted proposals (Y40) | negative abnormal returns (G12) |
| mutual funds not collecting information (G23) | harmful proposals passing (K16) |
| informed shareholder base (G34) | benefits of low-cost shareholder activism (G34) |