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The Efficient Monitoring Role of Proxy Contests: An Empirical Analysis of Post-Contest Control Changes and Firm Performance

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  • Lisa F. Borstadt
  • Thomas J. Zwirlein

Abstract

We present an empirical analysis of the subsequent disposition and share price performance of 142 firms involved in proxy contests for board seats in the period 1962-1986. We find evidence that proxy contests increase corporate efficiency through improved monitoring of firms, even in the absence of takeover-related control activity. Our results support the view that proxy contests are an effective managerial disciplinary mechanism in the absence of a takeover.

Suggested Citation

  • Lisa F. Borstadt & Thomas J. Zwirlein, 1992. "The Efficient Monitoring Role of Proxy Contests: An Empirical Analysis of Post-Contest Control Changes and Firm Performance," Financial Management, Financial Management Association, vol. 21(3), Fall.
    • Handle: RePEc:fma:fmanag:borstadt92
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    Cited by:

    1. Josef Bajzik & Tomas Havranek & Zuzana Irsova & Jiri Novak, 2023. "Do Shareholder Activism Announcements Affect Stock Prices? A Meta-Analysis," Working Papers 2023/17, Czech National Bank.
    2. Fang Chen & Jian Huang & Han Yu, 2020. "The intra-industry effects of proxy contests," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(2), pages 321-347, April.
    3. Becht, Marco & Bolton, Patrick & Roell, Ailsa, 2003. "Corporate governance and control," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 1, pages 1-109, Elsevier.
    4. Mulherin, J. Harold & Poulsen, Annette B., 1998. "Proxy contests and corporate change: implications for shareholder wealth," Journal of Financial Economics, Elsevier, vol. 47(3), pages 279-313, March.
    5. Bajzík, Josef & Havranek, Tomas & Irsova, Zuzana & Novak, Jiri, 2023. "Does Shareholder Activism Create Value? A Meta-Analysis," CEPR Discussion Papers 18233, C.E.P.R. Discussion Papers.
    6. Rachel Geoffroy & Heemin Lee, 2021. "The Role of Academic Research in SEC Rulemaking: Evidence from Business Roundtable v. SEC," Journal of Accounting Research, Wiley Blackwell, vol. 59(2), pages 375-435, May.
    7. Michel Albouy & Alain Schatt, 2004. "Les prises de contrôle par les actionnaires contestataires:le cas André," Revue Finance Contrôle Stratégie, revues.org, vol. 7(2), pages 33-65, June.
    8. Fang Chen & Jian Huang & Han Yu, 2018. "The Intra-Industry Effects of Proxy Contests," Proceedings of the 8th International RAIS Conference, March 26-27, 2018 001, Research Association for Interdisciplinary Studies.
    9. Bajzik, Josef, 2023. "Is the role of shareholder activism in corporate governance overestimated?," Finance Research Letters, Elsevier, vol. 58(PC).

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