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.