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The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value

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  • VICENTE CUÑAT
  • MIREIA GINE
  • MARIA GUADALUPE

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.
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  • Vicente Cuñat & Mireia Gine & Maria Guadalupe, 2012. "The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value," Journal of Finance, American Finance Association, vol. 67(5), pages 1943-1977, October.
    • Handle: RePEc:bla:jfinan:v:67:y:2012:i:5:p:1943-1977
    DOI: j.1540-6261.2012.01776.x
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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