The Costs and Benefits of Shareholder Democracy

Mariassunta Giannetti and Nickolay Gantchev

No 13358, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Shareholder activism; Shareholder proposals; Shareholder voting; Corporate governance (search for similar items in EconPapers)
JEL-codes: D72 G3 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-cdm
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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