Shareholders in the Boardroom: Wealth Effects of the SEC’s Proposal to Facilitate Director Nominations

Ali C. Akyol, Wei Fen Lim and Patrick Verwijmeren

Journal of Financial and Quantitative Analysis, 2012, vol. 47, issue 5, 1029-1057

Abstract: Current attempts to reform financial markets presume that shareholder empowerment benefits shareholders. We investigate the wealth effects associated with the Securities and Exchange Commission’s rule to facilitate director nominations by shareholders. Our results are not in line with shareholder empowerment creating value: The average daily abnormal returns surrounding events that increase (decrease) the probability of the proposal’s passage are significantly negative (positive). Furthermore, given an increase in the probability of the proposal’s passage, firms whose shareholders are more likely to use the rule to nominate directors experience more negative abnormal returns.

Date: 2012
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