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Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable's Challenge

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  • Bo Becker
  • Daniel Bergstresser
  • Guhan Subramanian

Abstract

We use the Business Roundtable's challenge to the Securities and Exchange Commission's (SEC's) 2010 proxy access rule as a natural experiment to measure the value of shareholder proxy access. We find that firms that would have been most vulnerable to proxy access, as measured by institutional ownership and activist institutional ownership, lost value on October 4, 2010, when the SEC unexpectedly announced that it would delay implementation of the rule in response to the Business Roundtable's challenge. We examine intraday returns and find that the loss of value occurred just after the SEC's announcement on October 4. We find similar results for July 22, 2011, when the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of the Business Roundtable. These findings are consistent with the view that financial markets placed a positive value on shareholder access, as implemented in the SEC's 2010 rule.

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  • Bo Becker & Daniel Bergstresser & Guhan Subramanian, 2013. "Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable's Challenge," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 127-160.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/667411
    DOI: 10.1086/667411
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    2. Juan Pineiro-Chousa & Marcos Vizcaíno-González & Jérôme Caby, 2018. "Linking market capitalisation and voting pattern in corporate meetings," Post-Print halshs-02001463, HAL.
    3. Daron Acemoglu & Tarek A. Hassan & Ahmed Tahoun, 2018. "The Power of the Street: Evidence from Egypt’s Arab Spring," The Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 1-42.
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    5. Ferri, Fabrizio & Oesch, David, 2013. "Management Influence on Investors: Evidence from Shareholder Votes on the Frequency of Say on Pay," Working Papers on Finance 1329, University of St. Gallen, School of Finance.
    6. Gulen, Huseyin & O'Brien, William J., 2017. "Option repricing, corporate governance, and the effect of shareholder empowerment," Journal of Financial Economics, Elsevier, vol. 125(2), pages 389-415.
    7. Denes, Matthew R. & Karpoff, Jonathan M. & McWilliams, Victoria B., 2017. "Thirty years of shareholder activism: A survey of empirical research," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 405-424.
    8. Vizcaíno, Marcos & Chousa, Juan P., 2016. "Analyzing the influence of the funds' support on Tobin's q using SEM and fsQCA," Journal of Business Research, Elsevier, vol. 69(6), pages 2118-2124.
    9. Stefano Colonnello & Christoph Herpfer, 2021. "Do Courts Matter for Firm Value? Evidence from the US Court System," Journal of Law and Economics, University of Chicago Press, vol. 64(2), pages 403-438.
    10. Eric A. Posner & E. Glen Weyl, 2014. "Benefit-Cost Paradigms in Financial Regulation," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 1-34.
    11. Yonca Ertimur & Fabrizio Ferri & David Oesch, 2018. "Understanding Uncontested Director Elections," Management Science, INFORMS, vol. 64(7), pages 3400-3420, July.
    12. Ana M. Albuquerque & Mary Ellen Carter & Luann J. Lynch, 2015. "Court Intervention as a Governance Mechanism over CEO Pay: Evidence from the Citigroup Derivative Lawsuit," European Accounting Review, Taylor & Francis Journals, vol. 24(4), pages 637-658, December.
    13. Lucian A. Bebchuk & Alma Cohen & Charles C.Y. Wang, 2011. "Staggered Boards and the Wealth of Shareholders: Evidence from Two Natural Experiments," NBER Working Papers 17127, National Bureau of Economic Research, Inc.
    14. Andersen Martin & Bauhoff Sebastian, 2017. "The Share Price Effect of CVS Health’s Announcement to Stop Selling Tobacco: A Comparative Case Study Using Synthetic Controls," Forum for Health Economics & Policy, De Gruyter, vol. 20(1), pages 1-13, June.
    15. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    16. Burnett, Brian M. & Jorgensen, Bjorn N. & Pollard, Troy J., 2017. "The stock market reaction to losing or gaining foreign private issuer status," LSE Research Online Documents on Economics 67900, London School of Economics and Political Science, LSE Library.
    17. C.S. Agnes Cheng & Iftekhar Hasan & Feng Tang & Jing Xie, 2024. "Market Feedback Effect on CEO Pay: Evidence from Peers’ Say-on-Pay Voting Failures," Working Papers 202408, University of Macau, Faculty of Business Administration.
    18. Marcos Vizcaíno-González & Juan Pineiro-Chousa & Jorge Sáinz-González, 2017. "Selecting explanatory factors of voting decisions by means of fsQCA and ANN," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(5), pages 2049-2061, September.
    19. Cohen, Alma & Wang, Charles C.Y., 2013. "How do staggered boards affect shareholder value? Evidence from a natural experiment," Journal of Financial Economics, Elsevier, vol. 110(3), pages 627-641.
    20. Cohen, Alma & Wang, Charles C.Y., 2017. "Reexamining staggered boards and shareholder value," Journal of Financial Economics, Elsevier, vol. 125(3), pages 637-647.
    21. Akyol, Ali C. & Raff, Konrad & Verwijmeren, Patrick, 2017. "The elimination of broker voting in director elections," Finance Research Letters, Elsevier, vol. 21(C), pages 34-39.
    22. Edmans, Alex & Holderness, Clifford, 2016. "Blockholders: A Survey of Theory and Evidence," CEPR Discussion Papers 11442, C.E.P.R. Discussion Papers.
    23. Ağca, Şenay & Togan-Eğrican, Aslı, 2024. "Managerial activism," Journal of Corporate Finance, Elsevier, vol. 86(C).
    24. Peter Iliev & Svetla Vitanova, 2019. "The Effect of the Say-on-Pay Vote in the United States," Management Science, INFORMS, vol. 65(10), pages 4505-4521, October.
    25. George Drymiotes & Haijin Lin & Yonca Ertimur, 2020. "Shareholder Empowerment and Board of Directors Effectiveness," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2649-2695, December.

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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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