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The Costs and Benefits of Shareholder Democracy: Gadflies and Low-Cost Activism
[How close are shareholder votes?]

Author

Listed:
  • Nickolay Gantchev
  • Mariassunta Giannetti

Abstract

We show that there is cross-sectional variation in the quality of shareholder proposals. On average, proposals submitted by the most active individual sponsors are less likely to receive majority support, but they occasionally pass if shareholders mistakenly support them and may even be implemented due to directors’ career concerns. While gadfly proposals destroy shareholder value if they pass, shareholder proposals on average are value enhancing in firms with more informed shareholders. We conclude that more informed voting could increase the benefits associated with shareholder proposals.

Suggested Citation

  • Nickolay Gantchev & Mariassunta Giannetti, 2021. "The Costs and Benefits of Shareholder Democracy: Gadflies and Low-Cost Activism [How close are shareholder votes?]," The Review of Financial Studies, Society for Financial Studies, vol. 34(12), pages 5629-5675.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:12:p:5629-5675.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa128
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    Citations

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    Cited by:

    1. Gow, Ian D. & Larcker, David F. & Watts, Edward M., 2023. "Board diversity and shareholder voting," Journal of Corporate Finance, Elsevier, vol. 83(C).
    2. Matteo Gasparini & Peter Tufano, 2023. "The Evolving Academic Field of Climate Finance," Harvard Business School Working Papers 23-057, Harvard Business School.
    3. Loureiro, Gilberto & Mendonça, Cesar, 2024. "Do large registered investment funds undermine shareholder activism? Evidence from hedge fund proposals," Journal of Banking & Finance, Elsevier, vol. 162(C).
    4. Alex Edmans, 2023. "The end of ESG," Financial Management, Financial Management Association International, vol. 52(1), pages 3-17, March.
    5. Kallis, Linda & Corbet, Shaen, 2024. "Does soft shareholder activism hold hard consequences?," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 152-159.
    6. Xiaohui Li & Yao Shen & Jing Xie, 2024. "Proxy Voting on CEO Pay: Evidence from Rejection of the Inevitable Disclosure Doctrine," Working Papers 202412, University of Macau, Faculty of Business Administration.
    7. Ning Cai & Wen He & Guoqiang Wu & Xin Yu, 2024. "Online voting and minority shareholder dissent: Evidence from China," Financial Management, Financial Management Association International, vol. 53(2), pages 327-352, June.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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