The Disciplinary Effects of Proxy Contests
Proxy contests targeting business strategy and undervaluation create meaningful shareholder value, while those aimed at capital structure or governance changes generally do not.
Summary
Fos studies nearly two decades of proxy contests to assess their role in disciplining corporate management. He finds that target shareholders benefit substantially, with average abnormal returns of 6.5 percent around contest announcements, and that contests focused on business strategy and undervaluation deliver the biggest gains while those focused on capital structure or governance changes do not. He also documents that firms show signs of
Editor's opinion
Solid, well-regarded finding on activist-investor effectiveness, but fairly specific to shareholder-activism mechanics rather than strategy broadly.
Key concepts
Proxy contests · Corporate governance discipline · Shareholder value