Finance

Say Pays! Shareholder Voice and Firm Performance

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This article estimates the effects of Say-on-Pay (SoP), a policy that increases shareholder "voice" by providing shareholders with a regular vote on executive pay. We apply a regression discontinuity design to the votes on shareholder-sponsored SoP proposals. Adopting SoP leads to large increases in market value (5%) and to improvements in long-term profitability. In contrast, it has limited effects on pay levels and structure. Taken together our results suggest that SoP can be seen as a repeated regular vote of confidence on the CEO and that it serves as a disciplining device.
Bibliographic citation: Cuñat, Vicente; Giné, Mireia; Guadalupe, Maria, "Say Pays! Shareholder Voice and Firm Performance", Review of Finance, Vol. 20, No. 5, 2016, pp 1799 - 1834

Reference: 10.1093/rof/rfv056 (DOI)
Date: 08/2016
Author(s): Cuñat, Vicente; Giné, Mireia; Guadalupe, Maria
Document type: Article in Journal (refereed)
Languages: English