Seminar
The Vote is Cast: The Effect of Corporate Governance on Shareholder Value
Vicente Cunat (London School of Economics)
Fédération des Banques Françaises Seminar
TSE, April 11, 2011, 12:30–14:00, room MF 323
Reference
Vicente Cunat (London School of Economics), “The Vote is Cast: The Effect of Corporate Governance on Shareholder Value”, Fédération des Banques Françaises Seminar, TSE, April 11, 2011, 12:30–14:00, room MF 323.
Abstract
This paper estimates the effect of corporate governance provisions on shareholder value and long-term outcomes in S&P1500 firms. We apply a regression discontinuity design to shareholder votes on governance proposals in annual meetings. A close-call vote around the majority threshold is akin to a random outcome, allowing us to deal with prior expectations and the endogeneity of internal governance rules. Passing a corporate governance provision generates a 1.3% abnormal return on the day of the vote with an implied market value per provision of 2.8%. We also find evidence of changes in investment behavior and long-term performance improvements.
Keywords
Agency Cost; Corporate Governance; Shareholder Meetings; Regression Discontinuity; Event Studies;
JEL codes
- G14: Information and Market Efficiency • Event Studies • Insider Trading
- G34: Mergers • Acquisitions • Restructuring • Corporate Governance
Research partnership
Fédération des Banques Françaises Research Initiative (sustainable)