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The power of shareholder votes: Evidence from uncontested director elections

Author

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  • Aggarwal, Reena
  • Dahiya, Sandeep
  • Prabhala, Nagpurnanand R.

Abstract

This paper asks whether dissent votes in uncontested director elections have consequences for directors. We show that contrary to popular belief based on prior studies, shareholder votes have power and result in negative consequences for directors. Directors facing dissent are more likely to depart boards, especially if they are not lead directors or chairs of important committees. Directors facing dissent who do not leave are moved to less prominent positions on boards. Finally, we find evidence that directors facing dissent face reduced opportunities in the market for directors. We also find that the effects of dissent votes go beyond those of proxy advisor recommendations.

Suggested Citation

  • Aggarwal, Reena & Dahiya, Sandeep & Prabhala, Nagpurnanand R., 2019. "The power of shareholder votes: Evidence from uncontested director elections," Journal of Financial Economics, Elsevier, vol. 133(1), pages 134-153.
    • Handle: RePEc:eee:jfinec:v:133:y:2019:i:1:p:134-153
    DOI: 10.1016/j.jfineco.2018.12.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Director elections; Director reputation; Shareholder voting; Proxy advisor;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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