Suchergebnisse

Abstract'Shareholder rights' are the legal entitlements of shareholders vis-à-vis companies in which they invest. A large body of research has sought to investigate how shareholder rights foster accountability of controllers. The concern has been that without accountability, managers and dominant shareholders will use their power to further their own interests at the expense of outside investors. A contrasting concern is that strengthening shareholder rights may come at the expense of other parties, which may also lead to misallocation of corporate resources. A recently-emerging body of research suggests that the relationship between shareholder rights and social welfare is not monotonic, but rather inverse-U-shaped. We argue that the calibration and impact of shareholder rights depends crucially on the institutional channel(s) through which they are implemented—voting, litigation, and/or market pricing. In particular, the market pricing channel intensifies the effects of shareholder rights in ways that can be excessive. This can harm not only other constituencies but also shareholders, as it can promote short-termism and systemic externalities. These problems are less pronounced for shareholder rights implemented through the voting channel.

We examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.

In the 21st century, greater attention is being paid to the issue of shareholder rights and corporate governance in U.S. corporations by regulators, shareholders and the general public. A previous paper by the authors finds that the level of shareholder rights generally has not increased and may have declined amongst the S&P 500 companies, despite the recent legislative and regulatory reforms. Evidence suggests that instead firms are searching for an optimum level of shareholder rights that balances the risks and rewards of greater shareholder rights. This study investigates the financial performance of firms with greater shareholder rights (GSR) and contrasts it with that of firms with lower shareholder rights (LSR). This paper finds that GSR firms may perform better on some financial criteria, in absolute terms, but when adjusted for volatility, LSR firms may perform better, contrary to the conventional wisdom.

AbstractWe show how capital structure is influenced by the strength of shareholder rights. Our empirical evidence shows an inverse relation between leverage and shareholder rights, suggesting that firms adopt higher debt ratios where shareholder rights are more restricted. This is consistent with agency theory, which predicts that leverage helps alleviate agency problems. This negative relation, however, is not found in regulated firms (i.e., utilities). We contend that this is because regulation already helps alleviate agency conflicts and, hence, mitigates the role of leverage in controlling agency costs.

Greater attention is being paid to the issue of shareholder rights and corporate governance, particularly since the scandals of 1990s and 2000s and the stock market decline of the new millennium. This study advances the concept of an optimum level of shareholder rights in corporate governance and analyzes the long-run trends in shareholder rights versus management entrenchment, using the G-Index. This study finds that the level of shareholder rights generally has not increased, despite the legislative and regulatory reforms of the 2000s and contrary to the general perception. Rather, shareholder rights have declined amongst the large, S&P 500 companies. The paper also finds that there has been a tendency on the part of firms to converge to a median-level/norm of shareholder rights. Evidence further suggests that firms are searching for an optimum level that balances the risks and rewards of greater shareholder rights.