Working Paper: NBER ID: w17797
Authors: Bo Becker; Daniel Bergstresser; Guhan Subramanian
Abstract: We use the Business Roundtable's challenge to the SEC's 2010 proxy access rule as a natural experiment to measure the value of shareholder proxy access. We find that firms that would have been most vulnerable to proxy access, as measured by institutional ownership and activist institutional ownership in particular, lost value on October 4, 2010, when the SEC unexpectedly announced that it would delay implementation of the Rule in response to the Business Roundtable challenge. We also examine intra-day returns and find that the value loss occurred just after the SEC's announcement on October 4. We find similar results on July 22, 2011, when the D.C. Circuit ruled in favor of the Business Roundtable. These findings are consistent with the view that financial markets placed a positive value on shareholder access, as implemented in the SEC's 2010 Rule.
Keywords: Shareholder Proxy Access; Firm Value; Corporate Governance
JEL Codes: G14; G32; G34; G38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SEC's announcement on October 4, 2010 (G18) | decline in stock value of firms with high institutional ownership (G32) |
| SEC's announcement on October 4, 2010 (G18) | perceived value of shareholder proxy access (G34) |
| DC Circuit ruling against the proxy access rule on July 22, 2011 (G34) | decline in stock value of firms with high institutional ownership (G32) |
| increased institutional and activist ownership (G34) | negative returns on event dates (G14) |