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
JEL(s):	G34, M52
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.