Sunday, March 30, 2008
Does Shareholder Voting Maximize Stock Market Value? , by YAIR JASON LISTOKIN , Yale Law School , was recently posted on SSRN. Here is the abstract:
This paper examines the relation between shareholder voting and stock market value from a novel empirical perspective. If voting maximizes value, then the outcome of close proxy contests should not have a systematic effect on stock prices; price setters will anticipate that voting aggregates information efficiently and will build this expectation into the price of the stock before the voting outcome is announced The paper shows, however, that close dissident victories are associated with significant positive movements in stock prices, while close management victories are associated with negative stock price effects. This suggests that voting outcomes favor management rather than maximizing value, with important policy ramifications. Viewed from a regression discontinuity (RD) design perspective, the study provides unique evidence that dissident control of decision making causes increases in stock value.