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The vote is cast: the effect of corporate governance on shareholder value

Cuñat, Vicente, Gine, Mireia and Guadalupe, Maria (2010) The vote is cast: the effect of corporate governance on shareholder value. NBER working paper, 16574. The National Bureau of Economic Research, Cambridge, MA, USA.

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Abstract

This paper estimates the effect of corporate governance provisions on shareholder value and long-term outcomes in S&P1500 firms. We apply a regression discontinuity design to shareholder votes on governance proposals in annual meetings. A close-call vote around the majority threshold is akin to a random outcome, allowing us to deal with prior expectations and the endogeneity of internal governance rules. Passing a corporate governance provision generates a 1.3% abnormal return on the day of the vote with an implied market value per provision of 2.8%. We also find evidence of changes in investment behavior and long-term performance improvements.

Item Type: Monograph (Working Paper)
Official URL: http://www.nber.org/
Additional Information: © 2010 The National Bureau of Economic Research
Library of Congress subject classification: H Social Sciences > HG Finance
Journal of Economic Literature Classification System: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Finance
Departments > Management
Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 16574
Date Deposited: 09 Aug 2011 15:57
URL: http://eprints.lse.ac.uk/37793/

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