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.
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.
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