The research reported here is part of the NBER's research program in Financial Markets and Moneta... more The research reported here is part of the NBER's research program in Financial Markets and Monetary Economics. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.
for helpful suggestions, and to anonymous respondents to the questionnaire. This research was sup... more for helpful suggestions, and to anonymous respondents to the questionnaire. This research was supported by the National Science Foundation under grant No. 8408565. The views expressed here are those of the authors and do not necessarily represent the views of the institutions with which they are affiliated. The research reported here is part of the NBER's research program in Financial Markets and Monetary Economics. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.
Antitakeover amendments change the structure of the corporate charter and ostensibly increase the... more Antitakeover amendments change the structure of the corporate charter and ostensibly increase the bargaining power of management when confronted with a hostile outside contest for control of the corporation. Recent evidence shows that, as of December 1986, ...
This paper examines how information and ownership structure affect voting outcomes on shareholder... more This paper examines how information and ownership structure affect voting outcomes on shareholder-sponsored proposals to change corporate governance structure. We find that the outcomes of votes vary systematically with the governance and performance records ...
This paper examines the effects of employee stock ownership plans (ESOPs) on shareholder wealth. ... more This paper examines the effects of employee stock ownership plans (ESOPs) on shareholder wealth. ESOPs established in the presence of takeover activity reduce share values, by approximately 4% on average. ESOPs also reduce share values if they are structured to transfer control away from outside shareholders, by creatin g a new ownership block with veto power over takeover bids. Large ESOPs established with nonvoting stock, so as to preclude any immediate control transfers, result in a significant increase in share values. The wealth effect of any given ESOP thus depends upon both its incentive and control effects on the corporation.
Three problems may discourage the use of proxy contests to challenge management and transfer corp... more Three problems may discourage the use of proxy contests to challenge management and transfer corporate control. First, inefficiency in the system of proxy vote solicitation can give management a vote-getting advantage. Second, due to contlict-of-interest pressures, institutional investors may vote with management against their own fiduciary interests Third, because some dissident proxy challenges may be 'crank' bids, with no prospect for incmasing sham values, dissi&n~ may have to incur costs to signal the value of their bid to outside shareholders. Tests on a sample of 100 proxy contest+ from the period 1981-1985 contirm the existence of these problems.
This paper analyzes the SEC's proxy regulations and assesses their effects on corporate governanc... more This paper analyzes the SEC's proxy regulations and assesses their effects on corporate governance. The proxy rules began in 1935 as a minimal series of disclosure requirements and a prohibition against fraud. By 1956, they imposed extensive and wide-ranging disclosure requirements on anyone wishing to communicate about voting issues and required that all such communications be cleared in advance-in essence, censored-by the SEC. I present evidence that since that time, the rules have significantly increased the costs of communication and coordinated action among shareholders. They have thus deterred shareholder initiatives and inhibited the development of a private market for information about voting issues.
Journal of Economic Behavior & Organization, 1989
Questionnaire surveys of institutional and individual investors were undertaken to learn about pa... more Questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications. It was found that direct interpersonal communications are very important in investor decisions. Questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word-of-mouth communications or other salient stimuli. Randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically. Contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth. The survey evidence is interpreted as supporting such models.
... Peavey, John W. Ill, and Dave A. Goodwin. ... Reinganum, Marc R. "Misspecification of Ca... more ... Peavey, John W. Ill, and Dave A. Goodwin. ... Reinganum, Marc R. "Misspecification of Capital Asset Pricing: Empirical Anomalies Based on Earnings Yields and Market ... Ross, Stephen A. "The Arbitrage Theory of Capital Asset Pricing." Journal of Economic Theory, December 1976 ...
The research reported here is part of the NBER's research program in Financial Markets and Moneta... more The research reported here is part of the NBER's research program in Financial Markets and Monetary Economics. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.
for helpful suggestions, and to anonymous respondents to the questionnaire. This research was sup... more for helpful suggestions, and to anonymous respondents to the questionnaire. This research was supported by the National Science Foundation under grant No. 8408565. The views expressed here are those of the authors and do not necessarily represent the views of the institutions with which they are affiliated. The research reported here is part of the NBER's research program in Financial Markets and Monetary Economics. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.
Antitakeover amendments change the structure of the corporate charter and ostensibly increase the... more Antitakeover amendments change the structure of the corporate charter and ostensibly increase the bargaining power of management when confronted with a hostile outside contest for control of the corporation. Recent evidence shows that, as of December 1986, ...
This paper examines how information and ownership structure affect voting outcomes on shareholder... more This paper examines how information and ownership structure affect voting outcomes on shareholder-sponsored proposals to change corporate governance structure. We find that the outcomes of votes vary systematically with the governance and performance records ...
This paper examines the effects of employee stock ownership plans (ESOPs) on shareholder wealth. ... more This paper examines the effects of employee stock ownership plans (ESOPs) on shareholder wealth. ESOPs established in the presence of takeover activity reduce share values, by approximately 4% on average. ESOPs also reduce share values if they are structured to transfer control away from outside shareholders, by creatin g a new ownership block with veto power over takeover bids. Large ESOPs established with nonvoting stock, so as to preclude any immediate control transfers, result in a significant increase in share values. The wealth effect of any given ESOP thus depends upon both its incentive and control effects on the corporation.
Three problems may discourage the use of proxy contests to challenge management and transfer corp... more Three problems may discourage the use of proxy contests to challenge management and transfer corporate control. First, inefficiency in the system of proxy vote solicitation can give management a vote-getting advantage. Second, due to contlict-of-interest pressures, institutional investors may vote with management against their own fiduciary interests Third, because some dissident proxy challenges may be 'crank' bids, with no prospect for incmasing sham values, dissi&n~ may have to incur costs to signal the value of their bid to outside shareholders. Tests on a sample of 100 proxy contest+ from the period 1981-1985 contirm the existence of these problems.
This paper analyzes the SEC's proxy regulations and assesses their effects on corporate governanc... more This paper analyzes the SEC's proxy regulations and assesses their effects on corporate governance. The proxy rules began in 1935 as a minimal series of disclosure requirements and a prohibition against fraud. By 1956, they imposed extensive and wide-ranging disclosure requirements on anyone wishing to communicate about voting issues and required that all such communications be cleared in advance-in essence, censored-by the SEC. I present evidence that since that time, the rules have significantly increased the costs of communication and coordinated action among shareholders. They have thus deterred shareholder initiatives and inhibited the development of a private market for information about voting issues.
Journal of Economic Behavior & Organization, 1989
Questionnaire surveys of institutional and individual investors were undertaken to learn about pa... more Questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications. It was found that direct interpersonal communications are very important in investor decisions. Questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word-of-mouth communications or other salient stimuli. Randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically. Contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth. The survey evidence is interpreted as supporting such models.
... Peavey, John W. Ill, and Dave A. Goodwin. ... Reinganum, Marc R. "Misspecification of Ca... more ... Peavey, John W. Ill, and Dave A. Goodwin. ... Reinganum, Marc R. "Misspecification of Capital Asset Pricing: Empirical Anomalies Based on Earnings Yields and Market ... Ross, Stephen A. "The Arbitrage Theory of Capital Asset Pricing." Journal of Economic Theory, December 1976 ...
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