Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

Marco Becht, Stefano Rossi and Andrea Polo

No 10506, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Previous studies of voting on acquisitions are inconclusive because shareholder approval in the United States is discretionary for management. We study the U.K. where approval is mandatory for deals that exceed a multivariate relative size threshold. We find that in the U.K. shareholders gain 8 cents per dollar at announcement with mandatory voting, or $13.6 billion over 1992-2010 in aggregate; without voting U.K. shareholders lost $3 billion. U.S. shareholders lost $214 billion in matched deals. Differences-in-differences and regression discontinuity analyses support a causal interpretation. The evidence suggests that mandatory voting imposes a binding constraint on acquirer CEOs.

Keywords: Corporate acquisitions; Shareholder voting; Corporate governance (search for similar items in EconPapers)
JEL-codes: G34 K22 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-bec and nep-cdm
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Journal Article: Does Mandatory Shareholder Voting Prevent Bad Acquisitions? (2016)
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