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

Cuñat, Vicente and Gine, Mireia and Guadalupe, Maria (2012) The vote is cast: the effect of corporate governance on shareholder value. The Journal of Finance, 67 (5). pp. 1943-1977. ISSN 0022-1082

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Identification Number: 10.1111/j.1540-6261.2012.01776.x


This paper investigates whether improvements in the firm's internal corporate governance create value for shareholders. We analyze the market reaction to governance proposals that pass or fail by a small margin of votes in annual meetings. This provides a clean causal estimate that deals with the endogeneity of internal governance rules. We find that passing a proposal leads to significant positive abnormal returns. Adopting one governance proposal increases shareholder value by 2.8%. The market reaction is larger in firms with more antitakeover provisions, higher institutional ownership, and stronger investor activism for proposals sponsored by institutions. In addition, we find that acquisitions and capital expenditures decline and long-term performance improves.

Item Type: Article
Official URL:
Additional Information: © 2012 American Finance Association
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Collections > Economists Online
Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 01 Oct 2012 09:16
Last Modified: 09 Nov 2012 10:17

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