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The Costs and Benefits of Shareholder Democracy

Author

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  • Giannetti, Mariassunta
  • Gantchev, Nickolay

Abstract

We show that while low-cost shareholder activism via shareholder-sponsored proposals is occasionally value-enhancing, many proposals are submitted by the same few individual investors and other sponsors without organizational capabilities to analyze a large number of firms. These proposals if approved and subsequently implemented appear to destroy shareholder value. We show that firms whose shareholders are more likely to collect information before voting benefit from low-cost shareholder activism because these investors weed out low-quality proposals. We conclude that an informed shareholder base is crucial for firms to take advantage of low-cost shareholder activism.

Suggested Citation

  • Giannetti, Mariassunta & Gantchev, Nickolay, 2018. "The Costs and Benefits of Shareholder Democracy," CEPR Discussion Papers 13358, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13358
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    Cited by:

    1. He, Yazhou Ellen, 2021. "Communications in proxy contests," Journal of Corporate Finance, Elsevier, vol. 69(C).

    More about this item

    Keywords

    Shareholder activism; Shareholder proposals; Shareholder voting; Corporate governance;
    All these keywords.

    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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