Citation

Discussion Paper Details

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Full Details

Title: The Costs and Benefits of Shareholder Democracy

Author(s): Nick Gantchev and Mariassunta Giannetti

Publication Date: December 2018

Keyword(s): corporate governance, Shareholder activism, Shareholder proposals and shareholder voting

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Gantchev, N and Giannetti, M. 2018. 'The Costs and Benefits of Shareholder Democracy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13358