The vote is cast: the effect of corporate governance on shareholder value

Vicente Cuñat, Mireia Giné and Maria Guadalupe

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper estimates the effect of corporate governance provisions on shareholder value and long-term outcomes in S&P1500 firms. We apply a regression discontinuity design to shareholder votes on governance proposals in annual meetings. A close-call vote around the majority threshold is akin to a random outcome, allowing us to deal with prior expectations and the endogeneity of internal governance rules. Passing a corporate governance provision generates a 1.3% abnormal return on the day of the vote with an implied market value per provision of 2.8%. We also find evidence of changes in investment behavior and long-term performance improvements.

Keywords: agency cost; corporate governance; shareholder meetings; regression discontinuity; event studies (search for similar items in EconPapers)
JEL-codes: G14 G34 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2010-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://eprints.lse.ac.uk/119079/ Open access version. (application/pdf)

Related works:
Journal Article: The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value (2012)
Working Paper: The Vote is cast: The effect of Corporate Governance on Shareholder Value (2010)
Working Paper: The Vote is Cast: The Effect of Corporate Governance on Shareholder Value (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119079

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