Hostname: page-component-78c5997874-m6dg7 Total loading time: 0 Render date: 2024-11-15T06:55:40.592Z Has data issue: false hasContentIssue false
  • English
  • Français

Are Shareholder Proposals All Bark and No Bite? Evidence from Shareholder Resolutions to Rescind Poison Pills

Published online by Cambridge University Press:  06 April 2009

John M. Bizjak  and
Christopher J. Marquette
John M. Bizjak
Affiliation:
Portland State University, School of Business Administration, PO Box 751 Portland, OR 97207
Christopher J. Marquette
Affiliation:
Texas A&M University, Department of Finance, College Station, TX 77843
Get access Rights & Permissions [Opens in a new window]

Abstract

We provide a comprehensive examination of shareholder resolutions to rescind poison pills. We find that pill rescission proposals are more frequent the more negative the market reaction to the initial pill adoption and the lower the insider and unaffiliated block ownership. Votes for such a proposal increase when performance is poor and for more onerous poison pills. While we document a stock price decline associated with the proposal announcements, we find poison pills are more likely to be restructured or rescinded when there is a shareholder resolution. Moreover, pill revisions are associated with stockholder wealth increases. Collectively, our results suggest that pill rescission proposals are more frequent when the pill is more likely to harm shareholders and that managers respond to shareholder proposals.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 33 , Issue 4 , December 1998 , pp. 499 - 521
Copyright
Copyright © School of Business Administration, University of Washington 1998

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bergin, P. “Voting by Institutional Investors on Corporate Governance Issues in the 1988 Proxy Season.” Washington, DC: Investor Responsibility Research Center (1988).Google Scholar
Biersach, J. “Voting by Institutional Investors on Corporate Governance Issues in the 1990 Proxy Season.” Washington, DC: Investor Responsibility Research Center (1990).Google Scholar
Black, B. “Shareholder Activism and Corporate Governance in the United States.” In The New Palgrave Dictionary of Economics and the Law, Peter Newman, ed. (forthcoming 1998).Google Scholar
Brickley, J. “Interpreting Common Stock Returns around Proxy Statement Disclosures and Annual Shareholder Meetings.” Journal of Financial and Qualitative Analysis, 21 (1986), 343–350.CrossRefGoogle Scholar
Brickley, J.; Lease, R.; and Smith, C.. “Ownership Structure and Voting on Antitakeover Amendments.” Journal of Financial Economics, 20 (1988), 267–291.CrossRefGoogle Scholar
Brickley, J.; Coles, J.; and Terry, R.. “Outside Directors and the Adoption of Poison Pills.” Journal of Financial Economics, 35 (1994), 371–390.CrossRefGoogle Scholar
Carleton, W.; Nelson, J.; and Weisbach, M.. “The Influence of Institutions on Corporate Governance through Private Negotiations: Evidence from TIAA-CREF.” Working Paper, Univ. of Arizona (1998).CrossRefGoogle Scholar
Comment, R., and Schwert, G.. “Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures.” Journal of Financial Economics, 39 (1995), 3–44.CrossRefGoogle Scholar
Del Guercio, D., and Hawkins, J.. “The Impact and Motivation of Public Pension Fund Activism.” Working Paper, Univ. of Oregon (1997).Google Scholar
Gillan, S., and Starks, L.. “Corporate Governance Proposals and Shareholder Activism: The Role of Institutional Investors.” Working Paper, Univ. of Texas at Austin (1998).Google Scholar
Gordon, L., and Pound, J.. “Information, Ownership Structure, and Shareholder Voting: Evidence from Shareholder Sponsored Corporate Governance Proposals.” Journal of Finance, 48 (1993), 697–718.Google Scholar
John, K., and Klein, A.. “Shareholder Proposals and Corporate Governance.” Working Paper, New York Univ. (1994).Google Scholar
Kahle, K., and Walkling, R.. “The Impact of Industry Classifications on Financial Research.” Journal of Financial and Quantitative Analysis, 31 (1996), 309–335.CrossRefGoogle Scholar
Karpoff, J. “Does Shareholder Activism Work? A Survey of Empirical Findings.” Working Paper, Univ. of Washington (1998).Google Scholar
Karpoff, J.; Malatesta, P.; and Walkling, R.. “Corporate Governance and Shareholder Initiatives: Empirical Evidence.” Journal of Financial Economics, 42 (1996), 365–395.CrossRefGoogle Scholar
Krasnow, L. “Voting by Institutional Investors on Corporate Governance Issues in the 1988 Proxy Season.” Washington, DC: Investor Responsibility Research Center (1989).Google Scholar
Malatesta, P., and Walkling, R.. “Poison Pill Securities: Stockholder Wealth, Profitability, and Ownership Structure.” Journal of Financial Economics, 20 (1988), 347–376.CrossRefGoogle Scholar
Marcil, S., and O'Hara, P.. “Voting by Institutional Investors on Corporate Governance Issues in the 1988 Proxy Season.” Washington, DC: Investor Responsibility Research Center (1987).Google Scholar
Opler, T., and Sokobin, J.. “Does Coordinated Institutional Activism Work? An Analysis of the Activities of the Council of Institutional Investors.” Working Paper, Ohio State Univ. (1995).CrossRefGoogle Scholar
Palepu, K. “Predicting Takeover Targets: A Methodological and Empirical Analysis.” Journal of Financial Economics, 8 (1986), 3–35.Google Scholar
Rosenbaum, V. “Corporate Takeover Defenses: 1995 Edition.” Washington, DC: Investor Responsibility Research Center (1995).Google Scholar
Ryan, P. “Rule 14a–8, Institutional Shareholder Proposals, and Corporate Democracy.” Georgia Law Review, 23 (1988), 97–184.Google Scholar
Ryngaert, M. “The Effect of Poison Pill Securities on Shareholder Wealth.” Journal of Financial Economics, 20 (1988), 377–417.CrossRefGoogle Scholar
Sander, W. “Shareholder Voting Almanac: 1991 Edition.” Washington, DC: Investor Responsibility Research Center (1991).Google Scholar
Shivdasani, A. “Board Composition, Ownership Structure, and Hostile Takeovers.” Journal of Accounting and Economics, 16 (1993), 167–198.CrossRefGoogle Scholar
Smith, M. “Shareholder Activism by Institutional Investors: Evidence from CalPERS.” Journal of Finance, 51 (1996), 227–252.CrossRefGoogle Scholar
Strickland, D.; Wiles, K.; and Zenner, M.. “A Requiem for the USA: Is Small Shareholder Monitoring Effective?” Journal of Financial Economics, 40 (1996), 319–338.CrossRefGoogle Scholar
Wahal, S. “Public Pension Fund Activism and Firm Performance.” Journal of Financial and Quantitative Analysis, 31 (1996), 1–23.CrossRefGoogle Scholar
Young, P.; Millar, J.; and Glezen, G.. “Trading Volume, Management Solicitation, and Shareholder Voting.” Journal of Financial Economics, 33 (1993), 57–71.CrossRefGoogle Scholar