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Discussion Paper Details

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Title: Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

Author(s): Marco Becht, Andrea Polo and Stefano Rossi

Publication Date: March 2015

Keyword(s): corporate acquisitions, corporate governance and shareholder voting

Programme Area(s): Financial Economics

Abstract: Previous studies of voting on acquisitions are inconclusive because shareholder approval in the United States is discretionary for management. We study the U.K. where approval is mandatory for deals that exceed a multivariate relative size threshold. We find that in the U.K. shareholders gain 8 cents per dollar at announcement with mandatory voting, or $13.6 billion over 1992-2010 in aggregate; without voting U.K. shareholders lost $3 billion. U.S. shareholders lost $214 billion in matched deals. Differences-in-differences and regression discontinuity analyses support a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.

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Bibliographic Reference

Becht, M, Polo, A and Rossi, S. 2015. 'Does Mandatory Shareholder Voting Prevent Bad Acquisitions?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10506