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New Evidence on the Effectiveness of the Proxy Mechanism, Research Paper 9503

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New Evidence on the Effectiveness of the Proxy Mechanism, Research Paper 9503

DATE: March 1995

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ABSTRACT: The proxy fight literature to date has focused exclusively on proxy fights that progress to a shareholder vote or near-shareholder vote stage. In contrast, this paper uses a sampling methodology which retains all cases where a proxy fight is threatened, whether or not a vote eventually occurs. Less than one half of threatened proxy fights ultimately result in a shareholder vote. Votes are avoided in three-fourths of dropped contests when the target firm agrees to be acquired, reaches a settlement with the dissident, or restructures to the dissident' s satisfaction. These avoided contests are associated with significant increases in target firm value, comparable to the increases observed when contests end with a shareholder vote. The increases in firm value are found to be highly concentrated among firms which are acquired subsequent to a threatened proxy fight, providing evidence that the threat of a proxy fight is most effective as a means of forcing the sale of target firms.

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Fleming, Michael J. "New Evidence on the Effectiveness of the Proxy Mechanism, Research Paper 9503," Research Papers (Federal Reserve Bank of New York) (March 1995). https://fraser.stlouisfed.org/title/6570/item/615489, accessed on March 27, 2023.

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SUBJECTS:

THEMES: CLASSIFICATION:
  • jel: G34
  • jel: G32
  • lcc: HG136 .R45 no.9503
IDENTIFIERS:
  • oclc: 32916067
  • repec: fip:fednrp:9503
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