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Shareholders in the Boardroom: Wealth Effects of the SEC’s Proposal to Facilitate Director Nominations

Published online by Cambridge University Press:  14 June 2012

Ali C. Akyol ,
Wei Fen Lim  and
Patrick Verwijmeren
Ali C. Akyol
Affiliation:
aakyol@unimelb.edu.au
Wei Fen Lim
Affiliation:
w.lim6@ugrad.unimelb.edu.au, University of Melbourne, Victoria 3010, Australia
Patrick Verwijmeren
Affiliation:
p.verwijmeren@vu.nl, VU University Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands and University of Melbourne
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Abstract

Current attempts to reform financial markets presume that shareholder empowerment benefits shareholders. We investigate the wealth effects associated with the Securities and Exchange Commission’s rule to facilitate director nominations by shareholders. Our results are not in line with shareholder empowerment creating value: The average daily abnormal returns surrounding events that increase (decrease) the probability of the proposal’s passage are significantly negative (positive). Furthermore, given an increase in the probability of the proposal’s passage, firms whose shareholders are more likely to use the rule to nominate directors experience more negative abnormal returns.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 5 , October 2012 , pp. 1029 - 1057
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

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