What Are the Firm Value Implications of SEC-Challenged Shareholder Proposals?

Maxime Couvert ()
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Maxime Couvert: Faculty of Business and Economics, The University of Hong Kong, Pokfulam, Hong Kong; and HKU Jockey Club Enterprise Sustainability Global Research Institute, Pokfulam, Hong Kong

Management Science, 2025, vol. 71, issue 6, 4728-4756

Abstract: The Securities and Exchange Commission (SEC) permits managers to request the exclusion of shareholder-initiated proposals. I construct a novel data set of excluded and withdrawn proposals from the SEC’s responses to managers’ requests. An examination of announcement returns to withdrawal and exclusion decisions demonstrates that SEC-challenged proposals are value destroying. I find that special interest investors pursuing self-serving agendas and retail investors advocating for one-size-fits-all reforms explain the value-destroying nature of SEC-challenged proposals. On average, the SEC challenge benefits firm value by filtering out these harmful proposals. However, a regression discontinuity design reveals that proposals the SEC refuses to exclude may receive majority shareholder support and destroy firm value.

Keywords: corporate governance; corporate social responsibility; shareholder proposals; shareholder empowerment; Rule 14a-8 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:6:p:4728-4756

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