The Costs and Benefits of Shareholder Democracy
SpeakersNickolay Gantchev (Southern Methodist University, United States)
LocationUniversity of Amsterdam, Roeterseilandcampus, Building M
Date and time
April 25, 2019
13:00 - 14:15
We show that, while low-cost shareholder activism via shareholder-sponsored proposals is occasionally value-enhancing, many proposals are submitted by the same few individual investors and other sponsors without organizational capabilities to analyze a large number of firms. These proposals, if approved and subsequently implemented, appear to destroy shareholder value. Firms whose shareholders are more likely to collect information before voting benefit from low-cost shareholder activism because these investors weed out low-quality proposals. We conclude that an informed shareholder base is crucial for firms to take advantage of low-cost shareholder activism.