The power of shareholder votes: Evidence from uncontested director elections

Aggarwal, Reena; Dahiya, Sandeep; Prabhala, Nagpurnanand

doi:10.1016/j.jfineco.2018.12.002

Cited by 109 publications

(70 citation statements)

References 39 publications

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“…This gives them enough voting power to be pivotal often. Moreover,Aggarwal, Dahiya, and Prabhala (2019) showed that shareholder dissent hurts directors and that director elections matter because of career concerns. In particular, these authors showed that increasing the votes withheld by only 10% leads to a 24% increase in the likelihood of director turnover.5 Azar and Vives (2019b) examined the interaction of competition policy with other government policies to foster employment.…”

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confidence: 99%

General Equilibrium Oligopoly and Ownership Structure

Azar

Vives

2021

ECTA

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We develop a tractable general equilibrium framework in which firms are large and have market power with respect to both products and labor, and in which a firm's decisions are affected by its ownership structure. We characterize the Cournot–Walras equilibrium of an economy where each firm maximizes a share‐weighted average of shareholder utilities—rendering the equilibrium independent of price normalization. In a one‐sector economy, if returns to scale are non‐increasing, then an increase in “effective” market concentration (which accounts for common ownership) leads to declines in employment, real wages, and the labor share. Yet when there are multiple sectors, due to an intersectoral pecuniary externality, an increase in common ownership could stimulate the economy when the elasticity of labor supply is high relative to the elasticity of substitution in product markets. We characterize for which ownership structures the monopolistically competitive limit or an oligopolistic one is attained as the number of sectors in the economy increases. When firms have heterogeneous constant returns to scale technologies, we find that an increase in common ownership leads to markets that are more concentrated.

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confidence: 99%

General Equilibrium Oligopoly and Ownership Structure

Azar

Vives

2021

ECTA

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“…Aggarwal et al . () study directors with a relatively high level of no votes at annual meetings (e.g., 10% no votes). Their major findings are striking.…”

Section: Causal Evidence On the Impacts Of Board Independence On Firmmentioning

confidence: 99%

A Survey of Recent Evidence on Boards of Directors and CEO Incentives

Masulis

2020

Asia-Pac J of Fin Stud

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This article surveys the recent literature on boards of directors and the interplay between director incentives and CEO incentives. The primary focus is on how the incentives and other characteristics of directors, boards, and CEOs interact to affect firm performance. The article reviews the recent evidence documenting a causal relationship between board independence and measures of firm performance. It also discusses the major limitations of the current measure of director independence. Finally, the article highlights how board independence provides strong incentives for CEOs to create firm value and examines the recent evidence on what other director characteristics improve board effectiveness.

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“…Finally, more recent evidence challenges the prior findings on the lack of a relation between votes withheld from directors and subsequent director turnover as well as the number of other directorships held. Specifically, Aggarwal et al (2019) show that director turnover is more likely when more shareholders withhold votes from a director: 1.84 percent of directors who receive less than majority dissent depart within a year of the election compared to 7.14 percent when there is majority dissent. These authors also document a negative association between votes withheld from directors and changes in outside directorships.…”

Section: Uncontested Electionsmentioning

confidence: 99%

Shareholder Empowerment and Board of Directors Effectiveness*

Drymiotes

Lin

Ertimur

2020

Contemporary Accting Res

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We develop a model to examine implications of empowering shareholders to replace directors. We find that shareholder empowerment functions as a double-edged sword. On the one hand, it can weaken ineffective boards' incentive to hold on to their position. On the other hand, it can induce both effective and ineffective boards to behave strategically to avoid a potential dismissal. As a result, empowerment does not necessarily increase firm value; in some cases, empowerment exacerbates the agency problem it is intended to address. Giving shareholders the power to set board compensation (have a "say on pay") can mitigate these problems. However, even when empowerment benefits (harms) the shareholders, firm value may decrease (increase). Finally, we discuss empirical and policy implications of the main findings.

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The power of shareholder votes: Evidence from uncontested director elections

Cited by 109 publications

References 39 publications

General Equilibrium Oligopoly and Ownership Structure

General Equilibrium Oligopoly and Ownership Structure

A Survey of Recent Evidence on Boards of Directors and CEO Incentives

Shareholder Empowerment and Board of Directors Effectiveness*

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