Cuñat, Vicente, Giné, Mireia and Guadalupe, Maria (2013) Say pays! Shareholder voice and firm performance. Financial Markets Group discussion paper, DP724. Financial Markets Group, The London School of Economics and Political Science, London, UK.
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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 (4.6%) and to improvements in long-term 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 operates as a regular vote of confidence, increasing efficiency and market value.
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