DP10141 Say Pays! Shareholder Voice and Firm Performance
|Author(s):||Vicente Cuñat, Mireia Giné, Maria Guadalupe|
|Publication Date:||September 2014|
|Keyword(s):||corporate governance, executive compensation, Say-on-Pay|
|Programme Areas:||Financial Economics, Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10141|
This paper estimates the effects of Say-on-Pay (SoP); a policy that increases shareholder "voice" by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (4%) and to improvements in longterm performance: profitability and labor productivity increase, while overheads and investment fall. In contrast, we find limited effects on pay levels and structure. This suggests that SoP serves as a regular vote of confidence on the CEO, that leads to higher efficiency and market value.