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The Vote is cast: The effect of Corporate Governance on Shareholder Value

Vicente Cuñat (), Mireia Gine () and Maria Guadalupe ()

FMG Discussion Papers from Financial Markets Group

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 behaviour and long-term performance improvements.

Date: 2010-12
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Related works:
Journal Article: The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value (2012) Downloads
Working Paper: The Vote is Cast: The Effect of Corporate Governance on Shareholder Value (2010) Downloads
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